Annual Corporate Governance Report

Transcription

SPECIMEN ANNEX I
ANNUAL CORPORATE GOVERNANCE REPORT
OF LISTED COMPANIES
Data identifying issuer
Ending date of reference financial
year
Tax Identification Code
Registered name
Registered address
31/12/2014
A-48010615
IBERDROLA, S.A.
Plaza Euskadi número 5, Bilbao 48009 Bizkaia
España
1
A. OWNERSHIP STRUCTURE
A.1.
Complete the following table about the share capital of the company:
Date of last change
16/12/2014
Share capital (€)
Number of shares
Number of
voting
rights
4,791,362,250
6,388,483,000
6,388,483,000
State whether there are different classes of shares with different rights attaching
thereto:
Yes
No
Number of
shares
Class
A.2.
x
Nominal value
per share
Number of voting
rights per share
Different rights
Breakdown of direct and indirect holders of significant shareholdings in the
company as of the end of the financial year, excluding directors:
Individual or
company
name of the
shareholder
Number of
direct
voting rights
Indirect voting rights
Direct holder
Number of
of the
voting
interest
rights
QATAR
INVESTMENT
AUTHORITY
-
QATAR HOLDING
LUXEMBOURG II,
S.À.R.L.
QATAR
INVESTMENT
AUTHORITY
-
DGIC
LUXEMBOURG,
S.À.R.L.
16,395,153
ACTIVIDADES DE
CONSTRUCCIÓN
Y SERVICIOS,
S.A.
-
NATIXIS, S.A.
164,352,702
ACTIVIDADES DE
CONSTRUCCIÓN
Y SERVICIOS,
S.A.
-
FUNDING
STATEMENT, S.A.
164,352,702
ACTIVIDADES DE
CONSTRUCCIÓN
Y SERVICIOS,
S.A.
-
STATEMENT
STRUCTURE, S.A.
36,656,815
KUTXABANK,
S.A.
-
KARTERA 1, S.L.
230,034,187
3.601
BLACKROCK,
INC.
-
BLACKROCK
GROUP
193.123.841
3,023
% of total
voting
rights
599,911,474
9.647
3.965
2
State the most significant changes in the shareholding structure that have
occurred during the financial year:
Individual or company
name of the shareholder
Date of
transaction
Description of transaction
ACTIVIDADES DE CONSTRUCCIÓN Y
SERVICIOS, S.A.
18-12-2014
EQUITY INTEREST DECREASED
BELOW 5%
BANCO FINANCIERO Y DE AHORROS,
S.A.
03-02-2014
BELOW 5%
BANCO FINANCIERO Y DE AHORROS,
S.A.
10-04-2014
SOLD 100% OF ITS EQUITY
INTEREST
SOCIÉTÉ GÉNÉRALE, S.A.
02-01-2014
EQUITY INTEREST INCREASED
ABOVE 5%
03-01-2014
BELOW 5%
29-01-2014
BELOW 3%
03-02-2014
ABOVE 3%
06-02-2014
BELOW 3%
07-02-2014
ABOVE 3%
25-03-2014
ABOVE 5%
26-03-2014
BELOW 5%
08-04-2014
BELOW 3%
11-04-2014
ABOVE 3%
16-04-2014
BELOW 3%
23-06-2014
ABOVE 3%
24-06-2014
BELOW 3%
COMMERZBANK, AG.
21-03-2014
ABOVE 3%
COMMERZBANK, AG.
24-03-2014
BELOW 3%
3
A.3.
Complete the following tables about members of the board of directors of the
company who have voting rights attaching to shares of the company:
Individual or
company
name of the
director
MR JOSÉ IGNACIO
SÁNCHEZ GALÁN
Number of
direct
voting rights
Indirect voting rights
Direct holder
Number of
of the
voting
interest
rights
% of total
voting
rights
6,950,772
-
258,873
-
MS ISABEL
GARCÍATABERNERO
RAMOS
235,238
-
MR PABLO
IGNACIO
SÁNCHEZGALÁN GARCÍATABERNERO
23,635
MR JULIO DE
MIGUEL AYNAT
230,775
-
-
0.00
MR SEBASTIÁN
BATTANER ARIAS
180,000
-
-
0.00
MR XABIER DE
IRALA ESTÉVEZ
232,314
-
-
0.00
1,222,863
-
-
0.02
MS INÉS MACHO
STADLER
56,934
-
-
0.00
MR BRAULIO
MEDEL CÁMARA
26,111
-
-
0.00
MS SAMANTHA
BARBER
1,634
-
-
0.00
MS MARÍA HELENA
ANTOLÍN RAYBAUD
2,868
-
-
0.00
MR SANTIAGO
MARTÍNEZ LAGE
14,984
-
-
0.00
MR JOSÉ LUIS SAN
PEDRO
GUERENABARRENA
633,510
-
-
0,01
MR ÁNGEL JESÚS
ACEBES PANIAGUA
5,632
-
-
0.00
MS GEORGINA
KESSEL MARTÍNEZ
10
-
-
0.00
MS DENISE MARY
HOLT
204
MR JOSÉ IGNACIO
SÁNCHEZ GALÁN
MR JOSÉ IGNACIO
SÁNCHEZ GALÁN
MR IÑIGO VÍCTOR
DE ORIOL IBARRA
0.11
0.00
4
Total percentage of voting rights held by the board of directors
0.13
Complete the following tables about members of the company’s board of
directors who hold rights to shares of the company:
Individual or
company
name of the
director
A.4.
Number of
direct
rights
Indirect rights
Direct holder
% of
total
voting
rights
State, if applicable, the family, commercial, contractual, or corporate
relationships between significant shareholders, to the extent known to the
company, unless they are immaterial or result from the ordinary course of
business:
Related individual or
company name
ACTIVIDADES DE
CONSTRUCCIÓN Y
SERVICIOS, S.A.
Type of relationship
Brief description
Corporate
There is an equity swap
contractual
relationship,
providing for the assignment of
voting rights, between Natixis,
S.A. (“Natixis”) and Actividades
de Construcción y Servicios, S.A.
(“ACS”), because, although ACS
includes it as an indirect holder in
its statement of significant
interest, Natixis (which does not
belong to the ACS Group) is
required to issue (unlike the
subsidiaries of ACS, Statement
Structure,
and
Funding
Statement), and does issue, its
own statement of significant
interest. It should be noted that
this situation already existed in
2010, 2011, 2012, and 2013.
Such equity swap contract,
expiring on 30 March 2018, was
amended by both parties in
December 2012 such that it may
only be paid in shares or cash at
the option of ACS.
NATIXIS, S.A.
A.5.
Number of
voting rights
Number of
equivalent
shares
State, if applicable, the commercial, contractual, or corporate relationships
between significant shareholders and the company and/or its group, unless they
are immaterial or result from the ordinary course of business:
Related individual or
company name
ACTIVIDADES DE
CONSTRUCCIÓN Y
SERVICIOS, S.A.
Type of
relationship
Brief description
Corporate
1) Iberdrola, S.A. (“Iberdrola” or the
“Company”) and ACS both hold indirect
interests in Electra de Montánchez, S.A, each
with a stake of 40%.
5
2) Iberdrola and ACS both hold indirect
interests in Sistema Eléctrica de Conexión
Huéneja, S.L. with stakes of 47.37% and
5.34%, respectively.
interests in Tirme, S.A., each with a stake of
20%.
interests in Neotec Capital Riesgo Sociedad
de Fondos, S.A., S.C.R. de régimen
simplificado, with stakes of 7.92% and
1) Iberdrola and Kutxabank, S.A. both hold
interests in Euskaltel, S.A., (2% and 42.83%,
respectively).
2) Iberdrola and Kutxabank, S.A.both hold
interests in Fiuna, S.A. (70% and 30%,
respectively).
interests in Operador del Mercado Ibérico de
Energía-Polo Español, S.A. (5.5% and
0.76%, respectively).
KUTXABANK, S.A.
Corporate
interests in Seed Capital de Bizkaia, SGECR,
S.A. (5% and 10%, respectively).
interests in Torre Iberdrola, A.I.E. (68.1% and
31.9%, respectively).
interests in Norapex, S.A. (each with a stake
of 50%).
indirect interests in Sociedad Promotora
Bilbao Gas Hub, S.A. (5.71% and 21.71%,
respectively).
BLACKROCK, INC.
A.6.
Corporate
1) Iberdrola and BlackRock, Inc. both hold
interests
in
Gamesa
Corporación
Tecnológica, S.A., with stakes of 19.69% and
State whether any private (paracorporate) shareholders’ agreements affecting the
company pursuant to the provisions of sections 530 and 531 of the Companies
Act (Ley de Sociedades de Capital) have been reported to the company. If so,
briefly describe them and list the shareholders bound by the agreement:
Yes
No
x
Participants in the private
shareholders’ agreement
% of share capital affected
Brief description of the
agreement
6
State whether the company is aware of the existence of concerted actions among
its shareholders. If so, briefly describe them:
Yes
No
x
Participants in concerted
action
concerted action
% of share capital affected
Expressly state whether any of such agreements, arrangements, or concerted
actions have been modified or terminated during the financial year:
A.7.
State whether there is any individual or legal entity that exercises or may exercise
control over the company pursuant to section 4 of the Securities Market Act (Ley
del Mercado de Valores). If so, identify it:
Yes
No
x
Individual or company name
Comments
Complete the following tables about the company’s treasury shares:
A.8.
As of year-end:
Number of direct
shares
Number of indirect
shares (*)
60,985,277
Total % of share
capital
-
0.955
(*) Through:
Individual or company name of direct holder of
the interest
Number of direct shares
Total:
Describe any significant changes, pursuant to the provisions of Royal Decree
1362/2007, which have occurred during the financial year:
Date of
notice
Total direct
shares acquired
Total indirect
shares acquired
Total % of share
capital
04/02/2014
57,665,581
-
0.905
24/04/2014
64,802,456
-
1.017
7
A.9.
09/05/2014
5,080,526
-
0.081
25/07/2014
26,377,350
-
0.418
30/12/2014
32,848,911
-
0.514
Describe the terms and conditions and the duration of the powers currently in
force given by the shareholders to the board of directors in order to issue,
repurchase, or transfer the shares of the company:
The shareholders acting at the General Shareholders’ Meeting held on 28 March 2014 resolved to
expressly authorise the Board of Directors, with the power of substitution, pursuant to the Companies Act
(Ley de Sociedades de Capital), to carry out the derivative acquisition of the shares of Iberdrola, S.A. on
the following terms:
a)
Purchases may be made by Iberdrola directly, or indirectly through its subsidiaries. Subsidiaries
carrying out regulated activities are excluded pursuant to the provisions of the Electricity Industry Act
(Ley del Sector Eléctrico) and the Hydrocarbons Act (Ley de Hidrocarburos).
b)
Purchases shall be made by means of a purchase and sale agreement, a swap arrangement, or any
other transaction permitted by law.
c)
Purchases may be made up to the maximum sum permitted by law (i.e. 10% of the share capital).
d)
Purchases may not be made at a higher price than that quoted on the Stock Exchange or at a price
lower than the share’s nominal value.
e)
The authorisation was granted for a period not to exceed five years as from the approval of the
resolution.
f)
In the net worth of the acquiring company there shall be established a restricted reserve equal to the
amount of the shares of the controlling company recorded under assets. Such reserve shall be
maintained for so long as the shares are not transferred or redeemed, in compliance with the
provisions of the Companies Act.
The shares, if any, purchased as a result of the aforementioned authorisation could be used both for
transfer or redemption or could be applied to the remuneration systems provided for in the Companies
Act; added to the foregoing alternatives was the possible development of programmes fostering the
acquisition of interests in the Company such as, for example, dividend reinvestment plans, loyalty bonds,
or similar instruments.
A.10.
State whether there are any restrictions on the transfer of securities and/or any
restriction on voting rights. In particular, disclose the existence of any
restrictions that might hinder a takeover of the company through the acquisition
of its shares in the market.
Yes
x
No
Description of restrictions
Those having an interest equal to or greater than 3% of the capital or voting rights of two or more
companies that have the status of Principal Operator in certain markets or sectors (including the
generation and supply of electricity) may not exercise rights in excess of such percentage in more than
one entity.
Article 29.2 of the By-Laws provides that no shareholder may cast a number of votes greater than those
corresponding to shares representing 10%. According to article 30.1, shareholders affected by a conflict
of interest may not exercise their voting rights at the General Shareholders’ Meeting with respect to the
matters or proposed resolutions with respect to which the conflict refers.
Section 527 of the restated text of the Companies Act provides that at listed companies (sociedades
anónimas cotizadas), the by-law provisions that directly or indirectly set, as a general rule, the maximum
8
number of votes that may be cast by the same shareholder, by the companies belonging to the same
group, or by those acting in concert with the foregoing shall be of no effect when, following a takeover bid,
the bidder has reached a percentage that is equal to or greater than 70% of the voting share capital,
unless such bidder is not subject to equivalent breakthrough measures or has not adopted them.
Article 56 of the By-Laws provides that the restrictions described above shall have no effect upon the
occurrence of certain circumstances.
As a consequence of the merger of Energy East Corporation (now Iberdrola USA, Inc.), the acquisition of
an interest that may give rise to the holding of a percentage equal to or greater than 10% of the share
capital of Iberdrola shall be subject to the prior approval of the regulatory authorities of the states in which
Iberdrola USA, Inc. carries out its activities.
A.11.
State whether the shareholders acting at a general shareholders’ meeting have
approved the adoption of breakthrough measures in the event of a takeover bid
pursuant to the provisions of Law 6/2007:
Yes
No
x
If applicable, describe the approved measures and the terms on which the
restrictions will become ineffective.
A.12.
State whether the company has issued securities that are not traded on a
regulated market within the European Community.
Yes
No
x
If applicable, specify the different classes of shares, if any, and the rights and
obligations attaching to each class of shares.
9
B. GENERAL SHAREHOLDERS’ MEETING
B.1.
State and, if applicable, explain whether there are differences with the minimum
requirements set out in the Companies Act in connection with the quorum
needed to hold a valid general shareholders’ meeting.
Yes
x No
Required quorum upon
1st call
Required quorum upon
2nd call
Quorum % different from that
established as a general rule in
section 193 of the Companies
Act
Quorum % different from that
established in section 194 of the
Companies Act for the special
circumstances described in section
194
-
66.67
-
60.00
Description of differences
As the only exception to the rules provided for in the Companies Act (Ley de Sociedades de Capital),
article 21.2 of the By-Laws increases the quorum required to hold a valid meeting “in order to adopt
resolutions regarding a change in the object of the Company, transformation, total split-off, dissolution of
the Company, and the amendment of this section 2”, in which case “shareholders representing two-thirds
(2/3) of subscribed share capital with voting rights must be in attendance at the first call to the General
Shareholders’ Meeting, and shareholders representing sixty (60%) per cent of such share capital must be
in attendance at the second call”.
B.2.
State and, if applicable, explain any differences from the rules set out in the
Companies Act for the adoption of corporate resolutions:
Yes
x
No
Describe how they differ from the rules provided by the Companies Act.
% established by the
entity for the
adoption of resolutions
Qualified majority other than
that established in section
201.2 of the Companies Act for
the cases set forth in section
194.1 of the Companies Act
Other instances in which a qualified
majority is required
75.00%
75.00%
Article 58 of the By-Laws provides that all resolutions intended to eliminate or amend the provisions
contained in title III (neutralisation of limitations in the event of takeover bids), in sections 3 to 5 of article
29 (limitation upon the maximum number of votes that a shareholder may cast), and in article 30 (conflicts
of interest) shall require the affirmative vote of three-fourths (3/4) of the share capital present in person or
by proxy at a General Shareholders’ Meeting.
B.3.
State the rules applicable to the amendment of the by-laws of the company. In
particular, disclose the majorities provided for amending the by-laws, and any
10
rules provided for the protection of the rights of the shareholders in the
amendment of the by-laws.
In addition to the provisions of section 285 et seq. of the Companies Act, the By-Laws of Iberdrola contain
articles 21.2 (qualified quorum) and 58 (qualified majority) mentioned in sections B.1 and B.2 above.
B.4.
State the data on attendance at the general shareholders’ meetings held during
the financial year referred to in this report and those of the prior financial year:
Date of
General
Shareholders’
Meeting
% of
shareholders
present in
person
% of
shareholders
represented by
proxy
28/03/2014
5.99
22/03/2013
15.73
B.5.
Attendance data
% absentee voting
Others
76.13
0.06
0.05
82.24
65.24
0.04
0.08
81.09
State whether there are any by-law restrictions requiring a minimum number of
shares to attend the general shareholders’ meeting.
Yes
x
No
Number of shares required to attend the general shareholders’
meeting
B.6.
1
State whether it has been resolved that certain decisions involving a structural
modification of the company (“subsidiarisation”, purchase/sale of core operating
assets, transactions equivalent to the liquidation of the company, etc.) must be
submitted to the shareholders for approval at a general shareholders’ meeting,
even if not expressly required by commercial law.
Yes
B.7.
Total
Electronic
voting
x
No
State the address and method for accessing the company’s website to access
information regarding corporate governance and other information regarding
general shareholders’ meetings that must be made available to the shareholders
through the company’s website.
www.iberdrola.com > Information for Shareholders and Investors > Corporate Governance.
On this website, one can also access information regarding past general shareholders’ meetings of the
Company: www.iberdrola.com > Information for Shareholders and Investors > Corporate Governance >
General Shareholders’ Meeting.
11
C. STRUCTURE OF THE COMPANY’S MANAGEMENT
C.1
Board of directors
C.1.1. Maximum and minimum number of directors set forth in the by-laws:
Maximum number of directors
14
Minimum number of directors
9
C.1.2. Complete the following table identifying the members of the board:
Individual or
company
name of the
director
Representative
Position on
Board
Date of first
appointment
Date of last
appointment
MR JOSÉ IGNACIO
SÁNCHEZ GALÁN
-
CHAIRMAN/CEO
21/05/2001
26/03/2010
MR JULIO DE
MIGUEL AYNAT
-
DIRECTOR
29/10/2003
26/03/2010
MR SEBASTIÁN
BATTANER ARIAS
-
DIRECTOR
26/05/2004
26/03/2010
MR XABIER DE
IRALA ESTÉVEZ
-
DIRECTOR
20/04/2005
22/06/2012
MR IÑIGO VÍCTOR
DE ORIOL IBARRA
-
DIRECTOR
26/04/2006
22/06/2012
MS INÉS MACHO
STADLER
-
DIRECTOR
07/06/2006
22/06/2012
MR BRAULIO
MEDEL CÁMARA
-
DIRECTOR
07/06/2006
22/06/2012
MS SAMANTHA
BARBER
-
DIRECTOR
31/07/2008
22/06/2012
MS MARÍA HELENA
ANTOLÍN RAYBAUD
-
DIRECTOR
26/03/2010
26/03/2010
MR SANTIAGO
MARTÍNEZ LAGE
-
DIRECTOR
26/03/2010
26/03/2010
MR JOSÉ LUIS SAN
PEDRO
GUERENABARRENA
-
DIRECTOR
24/04/2012
22/06/2012
MR ÁNGEL JESÚS
ACEBES PANIAGUA
-
DIRECTOR
24/04/2012
22/06/2012
MS GEORGINA
KESSEL MARTÍNEZ
-
DIRECTOR
23/04/2013
28/03/2014
MS DENISE MARY
HOLT
-
DIRECTOR
24/06/2014
24/06/2014
Total number of directors
Election
procedure
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
GENERAL
SHAREHOLDERS’
MEETING
INTERIM
APPOINTMENT
14
12
State the vacancies on the board of directors during the reporting period:
Individual or company name of
the director
Status of the director at time of vacancy
Date of
vacancy
MR MANUEL LAGARES
GÓMEZ-ABASCAL
Proprietary director
10/04/2014
C.1.3. Complete the following table about the members of the board and each member’s
status:
EXECUTIVE DIRECTORS
director
Committee that has reported
on the director’s appointment
Position within the company’s
structure
MR JOSÉ IGNACIO SÁNCHEZ
GALÁN
APPOINTMENTS AND
REMUNERATION COMMITTEE
Chairman & CEO
Total number of executive directors
1
Total % of the board
7.14
EXTERNAL PROPRIETARY DIRECTORS
director
Committee that has reported
on the director’s appointment
the significant shareholder
represented by the director or
that has proposed the
director’s appointment
MR XABIER DE IRALA
ESTÉVEZ
APPOINTMENTS AND
REMUNERATION COMMITTEE
Kutxabank, S.A.
Total number of proprietary directors
1
7.14
13
EXTERNAL INDEPENDENT DIRECTORS
Individual or company
name of director
Profile
Degree in Law from Universidad de Valencia.
Throughout his career he has been a member of numerous boards of
directors at companies in the infrastructure Abertis Infraestructuras S.A. y
Autopistas del Mare Nostrum, S.A.), energy (Enagás, S.A.) and finance (Caja
de Ahorros de Valencia, Castellón y Alicante, Bancaja, y Banco de Valencia,
S.A.) sectors.
NOTEWORTHY EXPERIENCE FOR THE HOLDING OF HIS POSITIONS
AT IBERDROLA:
Energy and industrial engineering industries
He has been a member of the the boards of directors of Abertis
Infraestructuras, S.A., of Autopistas del Mare Nostrum, S.A. (AUMAR), of
Enagás S.A. (2002-2004), and of Áurea Concesiones de Infraestructuras,
S.A.
Other industries
MR JULIO DE MIGUEL
AYNAT
In the financial industry, he was chair of Caja de Ahorros de Valencia,
Castellón y Alicante, Bancaja, Banco de Valencia, S.A., and Banco de
Murcia, S.A. He was vice-chair of Federación Valenciana de Cajas de
Ahorros, as well as a member of the Board of Directors of Confederación
Española de Cajas de Ahorros (CECA) and of the Instituto Valenciano de
Investigaciones Económicas (IVIE) (1998-2003).
He has also been a member of the Board of Directors of Metrovacesa, S.A. (a
listed company in the real estate industry) (2003-2007).
He is currently a member of the Advisory Board of the Confederation of
Business Organisations of the Valencian Community (Confederación de
Organizaciones Empresariales de la Comunidad Valenciana) (CIERVAL).
PREVIOUS EXPERIENCE IN CONNECTION WITH THE COMMITTEE OF
WHICH HE IS A MEMBER:
He has experience in areas connected to his position as a member of the
Audit and Risk Supervision Committee, having been a member of the Audit
and Compliance Committee of the Board of Directors of Enagás, S.A. He is
currently a member of the Instituto Español de Analistas Financieros.
OTHER INFORMATION:
He has also been the chair of Fundación Bancaja, and a trustee of Fundación
Premios Rey Jaime I, of Fundación de Estudios Financieros, and of
Fundación Universidad-Empresa de la Universidad de Valencia (ADEIT).
He is currently a member of the Board of Trustees of the Feria Muestrario
Internacional de Valencia and vice-chair of Fundación Cañada Blanch.
Degree in Economics from the School of Economics and Business
Administration (La Comercial) of Universidad de Deusto (Bilbao) and Degree
in Law from Universidad de Valladolid.
MR SEBASTIÁN
BATTANER ARIAS
He has spent a large part of his professional career at companies within the
industrial and financial sectors. In this regard, he has served as a director at
Uralita, S.A. and has held management positions at financial institutions like
Banco Atlántico, S.A. and Unicaja.
He actively practices as an economist and a lawyer
AT IBERDROLA:
He was the founder and executive chair of Grupo de Negocios Duero, S.A.U.
14
(2007-2011), a company with interests in the Spanish energy industry.
In the industrial sector, he served as a member of the Board of Directors of
Uralita, S.A. (2000-2002) and he began his professional career at Aceros de
Llodio, S.A. and Tubos Especiales Olarra, S.A.
Other industries
In the financial industry, he was executive chair of Caja de Ahorros de
Salamanca y Soria (Caja Duero) (2007-2011), and founder and executive
chair of companies controlled by Caja Duero, such as Leasing del Duero,
S.A., Unión del Duero de Seguros Generales, S.A., and Unión del Duero de
Seguros de Vida, S.A. He also founded Gesduero, S.A., a financial risk
analysis company, and was the co-founder of the European Group of
Financial Institutions (EGFI) (leading European economic interest grouping)
and of the Asociación Española de Banca de Negocios, and a member of the
Board of Confederación Española de Cajas de Ahorro (CECA). He has also
held management positions at other financial institutions such as Banco
Atlántico, S.A., Unicaja, and Banco Europeo de Finanzas, of which he was
chair.
His professional experience in the management of financial and insurance
entities puts him in an ideal position to discharge his duties at the helm of the
Audit and Risk Supervision Committee
OTHER INFORMATION:
In addition to his extensive experience in the financial and insurance
industries, he has taught at Universidad de Deusto and at the Instituto
Internacional de Dirección de Empresas (INSIDE).
He belongs to the board of trustees of various foundations, such as
Fundación Duques de Soria and Fundación Santa María la Real de Aguilar
de Campoo.
He was a member of the board of trustees of other foundations and
institutions, including Edades del Hombre, Museo de Madera Policromada de
Valladolid, Archivo de la Guerra Civil, and Universidad Pontificia de
Salamanca.
Bachelor of Arts in International Business, he has a graduate degree in the
Executive Corporate Management Programme of the Management School of
Instituto de Estudios Superiores de la Empresa de la Universidad de Navarra
(IESE Business School), and holds the title of certified European financial
analyst (CEFA) from the Instituto Español de Analistas Financieros.
His professional career has been closely linked to the energy industry, in
which he has been at the helm of the board of directors of companies in
various countries, gaining extensive experience in Latin America. He boasts a
long professional career at the Iberdrola group, which gives him broad and
thorough knowledge of the Company.
MR ÍÑIGO VÍCTOR DE
ORIOL IBARRA
AT IBERDROLA:
During his career as a senior officer at Iberdrola, he has chaired the board of
directors of electric companies in which the Group has an interest in various
countries (2001-2006). He has been chair of Electricidad de La Paz (Bolivia),
of Empresa de Luz y Fuerza Eléctrica de Oruro (Bolivia), and of
Iberoamericana de Energía Ibener (Chile), as well as a director of
Neoenergia (Brazil) and of Empresa Eléctrica de Guatemala, S.A.
He is also a member of the board of Empresa de Alumbrado Eléctrico de
Ceuta, S.A.
Other industries
Between 2001 and 2006, he was chair of the board of Empresa de Servicios
15
Sanitarios de Los Lagos (ESSAL) in Chile.
Since 2013, he has been a member of the board of Soil Recovery, S.L., a
company specialised in water and waste treatment and environmental
consulting and engineering services.
As regards his position on the Appointments and Remuneration Committee,
he has the experience of holding the position of Director of Corporate
Governance for the Americas (2001-2006), promoting the incorporation of the
principles and values provided for in Iberdrola’s Corporate Governance
System within the subsidiaries and investee companies in this region..
In addition, he boasts a long professional career with the Iberdrola Group,
which gives him broad and thorough knowledge of the Company. Among
other positions, he has served as director of management control at Amara,
S.A. (1989-1992) and as financial analyst at the Financial Division (19921997) and the International Division (1997-2001) of Iberdrola, S.A.
Degree in Economics from Universidad del País Vasco, Masters in Economy
from l’École des Hautes Études en Sciences Sociales (Paris), and Doctorate
in Economics (Ph.D.) from the same academic institution and from l’École
Nationale de la Statistique et de l’Administration Économique (ENSAE)
(Paris, France).
Throughout her academic career, she has taught at universities in Germany,
Belgium, Brazil, Denmark, France, and Portugal, in addition to Spain, and has
been elected as a member of noted associations in the academic, economic,
and business environment, like the European Economic Association.
NOTEWORTHY EXPERIENCE FOR THE HOLDING OF HER POSITIONS
AT IBERDROLA:
She is a member of the International Scientific Advisory Committee of the
Basque Centre for Climate Change (bc3) (climate change research centre
linked to Ikerbasque) and has served as chair of the Scientific Committee of
the 2011 Conference of the Asociación Española para la Economía
Energética (the Spanish affiliate of the International Association for Energy
Economics – IAEE).
Other industries
MS INÉS MACHO
STADLER
She is currently a Professor of Economics in the Economics and Economic
History Department of Universidad Autónoma de Barcelona, as well as
Professor of the Barcelona Graduate School of Economics, where she has
taught post-graduate studies within the “Competition and Market Regulation
Programme”. She has been a visiting professor at universities in America,
Europe, and Asia.
She is currently a member of the Executive Committee of the European
Association for Research in Industrial Economics, as well as of the Board of
the French Economic Observatory (OFCE) since 2013. In addition, she is an
honorary member of the European Economic Association and of the
Asociación Española de Economía, has been an elected member of the
Board of the European Economic Association (2006-2010), and has formed
part of the Advisory Board of the Research Service of Caja de Ahorros y
Pensiones de Barcelona, “la Caixa” (2008-2011).
She has been president of Asociación Española de Economía, as well as
coordinator of Agencia Nacional de Evaluación y Prospectiva and
representative at the European Science Foundation.
WHICH SHE IS A MEMBER:
She is an expert in scientific research on incentives and contracts, business
strategy, and industrial organisation, matters of specific interest for the
positions she holds on the Executive and Appointments and Remuneration
Committees, to which she has dedicated various publications (including
16
“Competition for Managers and Market Efficiency” and “Mergers, Investment
Decisions and Internal Organization”).
Degree in Economics and Business Administration from Universidad
Complutense de Madrid and Doctorate in Economics and Corporate
Sciences from Universidad de Málaga.
He has pursued a career primarily in the financial sector and in the academic
world as a professor of Public Finance. He is chair of Fundación Bancaria
Unicaja, executive chair of Unicaja Banco, S.A. and vice-chair of
Confederación Española de Cajas de Ahorros (CECA), of which he was
CEO. He has also served as Deputy Minister for Economy and Finance of the
Autonomous Government of Andalusia and as chair of Consejo Andaluz de
Colegios de Economistas
AT IBERDROLA:
He has been a member of the Board of Directors of the listed company
Acerinox, S.A. since 2008 and was a member of the Board of Directors of
Abertis Infraestructuras, S.A. from 2005 through 2010.
Other industries
MR BRAULIO MEDEL
CÁMARA
He has been executive chair of Monte de Piedad y Caja de Ahorros de
Ronda, Cádiz, Almería, Málaga, Antequera y Jaén (Unicaja) since 1991, and
has led the process of transformation of the Caja and its adjustment to the
new regulatory framework through its transformation into Fundación Bancaria
Unicaja, of which he is chair. He is also currently the executive chair of
Unicaja Banco, S.A. In addition, he is chair of Hidralia, S.A., of Alteria
Corporación Unicaja and of Federación de Cajas de Ahorros de Andalucía.
Furthermore, he is vice chair of Confederación Española de Cajas de
Ahorros (CECA), of which he was CEO until 1998, and a member of the
board of Caja de Seguros Reunidos, Compañía de Seguros y Reaseguros,
S.A. He has been chair of Ahorro Corporación, S.A. and a member of the
governance bodies of Agrupación Europea de Cajas de Ahorros, of which he
was vice-chair between 1992 and 1998.
He also has experience in areas connected to his position as a member of
the Corporate Social Responsibility Committee. He is an active member of
various boards of trustees and foundations for social and cultural purposes,
like Fundación CIEDES (Centro de Investigaciones Estratégicas y Desarrollo
Económico y Social), and has been a member of Fundación Tres Culturas
del Mediterráneo, of Fundación El Legado Andalusí, and of Fundación
Doñana 21.
OTHER INFORMATION:
He was Deputy Minister for Economy and Finance of the Autonomous
Government of Andalucía (1984-1987) and chair of Consejo Andaluz de
Colegios de Economistas (2003-2009).
He is a Professor of Public Finance at Universidad de Málaga and has
published over a hundred scientific works, including many books and articles
in specialised publications.
MS SAMANTHA
BARBER
Bachelor of Arts in Applied Foreign Languages and European Politics from
the University of Northumbria, Newcastle (England, United Kingdom). She
has also studied for three years at various French universities, obtaining
degrees that include a Post-Graduate Degree Course in European Union Law
from the University of Nancy.
She has spent her professional career in the fields of corporate business and
corporate social responsibility. She has been a consultant within the
European Parliament, a board member of Business for Scotland, and the
chief executive of Scottish Business in the Community.
17
In 2014 and 2013, she was selected as one of the “Top 100 Women to
Watch” according to the FTSE list and Cranfield University and is a member
of the prestigious Global Scot Network. In addition, she was a finalist and
earned second place in the annual Director of the Year Awards 2012 of IoD
Scotland NED.
She possesses management experience at business organisations that
promote corporate social responsibility. She began her professional career as
a consultant within the European Parliament providing support to the
Economic and Monetary Affairs Committee, a position she held for four years.
Prior to that she was appointed as a board member of Business for Scotland
(1998-2000, and was also the chief executive of Scottish Business in the
Community (2000-2009), an organisation chaired by HRH The Prince of
Wales.
Between 2007 and 2008 she was a member of the Advisory Council of
Scottish Power following the integration of the Scottish company into the
Iberdrola Group.
During nine years, she was a member of the Board of Directors of Right
Track Scotland, an organisation dedicated to advancing educational, training,
and employment opportunities for youths at risk of social exclusion, which
has afforded her wide experience in corporate social responsibility matters.
OTHER INFORMATION:
She is chair of Scottish Ensemble, vice-chair of Scotland’s 2020 Climate
Group, a member of the Advisory Board for Breakthrough Breast Cancer, and
undertakes consultancy and business coaching.
Degree in International Business & Business Administration from Eckerd
College, St. Petersburg, Florida (United States of America) and Master’s in
Business Administration from Anglia University, Cambridge (United Kingdom)
and from Escuela Politécnica de Valencia (Spain).
She has spent her career in the industrial sector and is currently a director, a
member of the Managing Board, and corporate director of Marketing,
Communication, and Institutional Relations of Grupo Antolin.
AT IBERDROLA:
She has experience as a member of the board of energy and industrial
companies as an external independent director of Iberdrola Renovables, S.A.
and a member of its Related-Party Transactions Committee from 2007
through 2010.
MS MARÍA HELENA
ANTOLÍN RAYBAUD
She is currently a member of the Managing Board of Sernauto (Asociación
Española de Fabricantes de Equipos y Componentes para Automoción)
since 2011.
She has been in charge of the corporate Industrial and Strategy divisions of
Grupo Antolin, where she is currently a board member, a member of the
Management Committe, and corporate director of Marketing, Communication,
and Institutional Relations.
She has domestic and international experience in areas relating to her
position as a member of the Corporate Social Responsibility CommitteeAt
Grupo Antolín-Irausa, she held the positions of director of Human Resources
Development and head of Total Quality, and as a corporate director has
performed her duties at the global level within the group, where she began
her career taking on successive responsibilities at subsidiaries based in
Germany, France, and Italy.
OTHER INFORMATION:
18
She is a member of the Permanent Commission of the Club Excelencia en
Gestión and a board member of France Foreign Trade (Comercio Exterior de
Francia), Spain section
Degree in Law from Universidad Complutense de Madrid. He continued his
studies at the Escuela de Funcionarios Internacionales de Madrid, the
Escuela Diplomática, The Hague Academy of International Law, the “Europa
Institut” in Amsterdam (The Netherlands), and INSEAD in Fontainebleau
(France).
A career diplomat on leave, he is the chairman of the law firm Martínez Lage,
Allendesalazar & Brokelmann.
AT IBERDROLA:
He has experience as a board member in the engineering and energy
industries. In the energy sector, he was an external independent director of
Iberdrola Renovables, S.A. between 2007 and 2010. In the industrial sector,
he is secretary of the boards of directors of companies belonging to
multinational groups like SKF Española, S.A. In the past, he was a member
of the boards of other companies such as Fujitsu Services y Telettra España.
Other industries
He has also served in the position of secretary of the Board of Directors of
Empresa Nacional Elcano de la Marina Mercante, S.A.
MR SANTIAGO
MARTÍNEZ LAGE
A career diplomat on leave, he has wide experience and expertise in the area
of institutional relations at the international level. He has been posted to
Algiers (Algeria), Libreville (Gabon), Sofia (Bulgaria), and Paris (France), and
has also served at the Office of the Secretary of State for Relations with the
European Community, where he provided advice to the Spanish Delegation
in the negotiations for accession to the European Communities.
He has a profound knowledge of EC Law and was the founder and director,
for twenty-eight years, of the Gaceta Jurídica de la Unión Europea y de la
Competencia.
In 1985 he established the law firm Martínez Lage & Asociados (now,
Martínez Lage, Allendesalazar & Brokelmann), a leading law firm in Spain
specialised in European Union and Competition Law.
He served as a member of the Executive Committee of Iberdrola Renovables,
S.A., and as chair of its Appointments and Remuneration Committee.
Prior to joining Iberdrola’s Appointment’s and Remuneration Committee, he
was a member and the secretary of its Audit and Risk Supervision
Committee.
OTHER INFORMATION:
He is vice-chair of the Spanish Association for the Study of European Law
(Asociación Española para el Estudio del Derecho Europeo) and the
European Law Section of the Royal Academy of Jurisprudence and
Legislation (Real Academia de Jurisprudencia y Legislación). In addition, he
is a Trustee of Fundación España México and a member of the Arbitrator
Appointment Committee of the Spanish Court of Arbitration.
In 2013, he was distinguished with the APTISSIMI professional career award
by ESADE Alumni.
MR ÁNGEL JESÚS
ACEBES PANIAGUA
Degree in Law from Universidad de Salamanca and lawyer, with almost
twenty years of practice experience. He has also discharged high-level duties
in the institutional sphere, including his position as member of the Council of
Ministers of the Spanish Government. He experience is complemented by
being a member of the boards of directors of Caja Madrid Cibeles, S.A. and
19
of Banco Financiero y de Ahorros, S.A. (“BFA”).
He divides his time between his position at Iberdrola and his work as chair
and founding member of Grupo MA Abogados Estudio Jurídico
AT IBERDROLA:
A practicing lawyer between 1982 and 1994, specialising in commercial law.
He returned to law practice in 2008 and founded Grupo MA Abogados
Estudio Jurídico (of which he is chair), a law firm based in six Spanish
Autonomous Communities with more than forty lawyers working in different
areas, such as corporate law, corporate governance, competition, mergers
and acquisitions, and regulated industries
He has been a member of the board of BFA between 27 July 2011 and 24
April 2012, chairing its Audit and Compliance Committee.
Through these positions, he has had relationships with affiliates of BFA active
in the energy (Iberdrola itself and the Comsa Ente, S.A. group) and
industrial/technological (Indra, S.A., active in technological services, and
Mecalux, S.A., active in logistics solutions), which companies, in most cases,
have a strong international presence.
In addition, he has significant knowledge of the regulatory area and regarding
the operation of government agencies, as he was Minister for Public
Administrations (1999-2000), Minister of Justice (2000-2002), and Minister of
the Interior (2002-2004) of the Spanish Government. During his political
career, he has also been a national senator and deputy, acquiring in-depth
knowledge of the regulatory framework.
Other industries
He also possesses experience in the management of companies with an
international profile, as a result of having served on the board of Caja Madrid
Cibeles, S.A. (2008 - 2011), which manages the investments of Grupo Caja
Madrid in other companies with activities in the financial, insurance (like
Mapfre Internacional, S.A.) and retail banking industries outside of Spain.
OTHER INFORMATION
He is also a trustee of Fundación Universitaria de Ávila, UCAV, and gives
courses, workshops, and lectures on various matters relating to law, politics,
and social matters.
Holder of a degree in Economics from Instituto Tecnológico Autónomo de
México and holds Master’s and Doctor’s degrees in Economics from
Columbia University in New York (United States of America).
She has spent her career primarily in the energy and financial sectors in
Mexico. She has been chair of the Energy Regulatory Commission (Comisión
Reguladora de Energía), State Secretary for Energy, chair of the Board of
Directors of Pemex and of the Board of Directors of CFE, general manager of
Banobras and of the National Mint of Mexico, and a board member at Nafinsa
and Bancomext.
MS GEORGINA
KESSEL MARTÍNEZ
She divides her time between her position at Iberdrola and her work as a
director of the subsidiary of Scotiabank in that country.
AT IBERDROLA:
She possesses extensive experience in the energy industry. She was State
secretary at the Office of the Energy Secretary (Sener) of the Government of
Mexico (2006-2011) and first chair of the Energy Regulatory Commission
(1996), which positions have equipped her with in-depth knowledge of
regulatory and institutional matters as a result of her direct involvement in the
energy transition process and in the design and implementation of the
regulation of the country’s electricity industry.
20
Between 2006 and 2011, she also served as chair of the boards of directors
of two large corporations, Petróleos Mexicanos (PEMEX) and the Federal
Electricity Commission (Comisión Federal de Electricidad) (CFE), from which
she led the design of policies and the supervision of financial progress and
infrastructure investment programmes.
Her participation in the Energy Council of the World Economic Forum (WEF)
and in the United Nations Organization Secretary General’s advisory group
(Sustainable Energy for All) has also allowed her to gain expertise and a
global view of the energy industry.
Other industries
She has knowledge and experience in other sectors, especially in the
financial infrastructure investment sector, in both the institutional and the
executive areas. She is an independent director of Grupo Financiero
Scotiabank Inverlat, S.A. de C.V. and has been general manager of Banco
Nacional de Obras y Servicios Públicos (Banobras), a development bank
engaged primarily in financing infrastructure projects (2011-2012); a member
of the governance bodies of Nacional Financiera (Nafinsa) and of Banco
Nacional de Comercio Exterior (Bancomext) (2006-2011); adviser to the chair
of the Federal Competition Commission (Comisión Federal de Competencia)
(CFC) (1995-1996); head of the Quasi-Autonomous Non-Governmental
Organisations Investment and Divestment Unit of the Office of the Secretary
of Finance and Public Credit of Mexico (1997-2001), and general manager of
the National Mint of Mexico (2002-2006).
Her training in the field of economics and her professional experience in the
management of institutions in the financial sector make her an ideal member
of the Audit and Risk Supervision Committee.
Her teaching practice and performance of executive roles in
economic/financial matters cause her profile to be even more appropriate for
her work on this Committee.
OTHER INFORMATION:
In the academic field, she has been a professor in the Economics
Department of Instituto Tecnológico Autónomo de México (ITAM), acting as
deputy chair of the course towards a Degree in Economics, and first deputy
chair and chair of the Alumni Association. She was also holder of the
Quintana Chair for Research in International Trade and has authored many
papers and specialised articles.
Degrees in Spanish Philology, French Philology, and Political Sciences from
the University of Bristol and Doctor of Laws from the University of Bristol
(England, United Kingdom).
A career diplomat, she has spent a large part of her professional life at the
United Kingdom diplomatic service, which has provided her with extensive
international experience. In the business field, she possesses experience in
the finance, health, and energy sectors.
MS DENISE MARY
HOLT
She divides her time between her position as a director of Iberdrola and her
activities in international organisations, academic institutions, and her position
as a director of HSBC Bank plc.
NOTEWORTHY EXPERIENCE FOR THE HOLDING OF HER POSITION AT
IBERDROLA:
She possesses experience and expertise in the energy industry, having been
a director at Scottish Power Renewable Energy Ltd from 2011 to 2012 and at
Scottish Power Networks Holdings Ltd from 2012 to 2014.
Other industries
She also possesses experience as a member of the board of directors of
international companies and institutions in other sectors, like the financial and
21
health industries. In the financial sector, she has been an independent
director and member of the Risk Committee of HSBC Bank plc since 2011,
and is also chair and independent director of its subsidiary M&S Financial
Services Ltd. In the health sector, she is an independent director of Nuffield
Health and a member of the Quality and Safety Committee and
Remuneration Committee of the Board of Directors of such institution.
Also noteworthy is the vast experience as a manager she has gained during
her extensive diplomatic career. She has been first secretary of the Embassy
of the United Kingdom in Brazil (1990-1993, director of Human Resources
(1999-2002) and Migration (2005-2007) and for the Overseas Territories (2at
the UK Foreign and Commonwealth Office (2005-2007) and British
ambassador to Mexico (2002-2005) and to Spain and Andorra (2007-2009).
OTHER INFORMATION:
A former chair of the Anglo-Spanish Society (2010-2013), Ms Holt currently
has ties with international organisations like Wilton Park International
Conference Centre and academic institutions like the Cañada Blanch Centre
for Contemporary Spanish Studies of the London School of Economics and
Political Science, the Institute of Latin American Studies of the University of
London, and the University of Bristol. She chairs the Nominations Committee
of the British Alzheimer’s Society.
She has been distinguished as Dame Commander of the Order of Saint
Michael and Saint George (DCMG) in recognition of her contribution to the
British diplomatic service.
Total number of independent directors
11
78.57
State whether any director classified as independent receives from the company
or its group any amount or benefit for items other than director remuneration, or
maintains or has maintained during the last financial year a business relationship
with the company or with any company of its group, whether in the director’s own
name or as a significant shareholder, director, or senior officer of an entity that
maintains or has maintained such relationship. If applicable, include a reasoned
statement of the director regarding the reasons for which it is believed that such
director can carry out the duties thereof as an independent director.
the director
Description of the relationship
Reasoned statement
OTHER EXTERNAL DIRECTORS
Individual or company name of director
Committee that has reported on or proposed
the director’s appointment
MR JOSÉ LUIS SAN PEDRO
GUERENABARRENA
APPOINTMENTS AND REMUNERATION
COMMITTEE
Total number of other external directors
1
7.14
Describe the reasons why they cannot be considered proprietary or independent
directors as well as their ties, whether with the company, its management, or its
shareholders.
22
the director
Company, officer, or
shareholder with which the
director has ties
Reasons
Mr San Pedro Guerenabarrena
held the position of chief
operating officer (consejerodirector general) until 24 June
2014, the date on which he
voluntarily ceased executive
duties, but continues to serve as
a member of the Board of
Directors and of the Executive
Committee.
GUERENABARRENA
IBERDROLA
Pursuant
to
the
current
Companies Act and Iberdrola’s
Corporate Governance System,
Mr San Pedro Guerenabarrena
cannot be classified as an
independent director until 5 years
have passed since he ceased to
serve as chief operating officer.
State the changes, if any, in the type of director during the period:
of the director
Date of change
Former status
Current status
GUERENABARRENA
24/06/2014
Executive director
Other external director
C.1.4. Complete the following table with information regarding the number of female
directors for the last 4 financial years, as well as the status of such directors:
% of total directors
each class
Number of female directors
Year t
Year t-1
Year t-2
Year t-3
Year t
Year t-1
Year t-2
Year t-3
Executive
-
-
-
-
-
-
-
-
Proprietary
-
-
-
-
-
-
-
-
Independent
5
4
3
3
45.45
40
33.33
27.27
Other external
-
-
-
-
-
-
-
-
Total
5
4
3
3
35.71
28.57
21.42
21.42
C.1.5. Describe any measures adopted to include on the board of directors a number of
women that allows for a balanced presence of men and women.
Description of measures
The Company’s Corporate Governance System entrusts the Appointments and Remuneration Committee
with the duty to ensure that when new vacancies are filled or new directors are appointed, the selection
procedures are free from any implied bias entailing any kind of discrimination and, in particular, that such
procedures do not hinder the selection of female directors.
23
Since 2006, Iberdrola has consistently increased the number of female directors on its Board of Directors.
On 7 June 2006, the Board of Directors appointed the director Ms Inés Macho Stadler on an interim basis
to fill a vacancy; such appointment was ratified by the shareholders at the General Shareholders’ Meeting
held on 29 March 2007, where the shareholders also approved her re-election for a five-year period. It
should also be noted that on 22 September 2009, Ms Inés Macho Stadler was appointed as lead
independent director (consejera independiente especialmente facultada), a position governed by the
provisions of article 38 of the By-Laws and article 21 of the Regulations of the Board of Directors.
Thereafter, at its meeting of 31 July 2008, the Board of Directors resolved to appoint the director Ms
Samantha Barber on an interim basis to fill a vacancy; such appointment was ratified by the shareholders
at the General Shareholders’ Meeting held on 20 March 2009.
The shareholders at the General Shareholders’ Meeting held on 26 March 2010 approved the proposal
for appointment of Ms María Helena Antolín Raybaud, who is classified as an external independent
director.
On 23 April 2013, Iberdrola’s Board of Directors approved the interim appointment of Ms Georgina Kessel
Martinez as an external independent director, which was subsequently ratified by the shareholders at the
General Shareholders’ Meeting held on 28 March 2014.
Finally, on 24 June 2014, the Board of Directors approved the interim appointment of Ms Denise Mary
Holt as an external independent director. Such appointment will be submitted to the shareholders for
ratification at the General Shareholders’ Meeting to be held on 27 March 2015.
C.1.6. Describe any measures approved by the remuneration committee in order for
selection procedures to be free of implicit biases that hinder the selection of
female directors, and in order for the company to deliberately search for women
who meet the professional profile that is sought and include them among
potential candidates:
Description of measures
The General Corporate Governance Policy provides in section 12 that “when new candidates for
membership on the Board of Directors are selected, and in order to ensure at all times the pre-eminence
of the corporate interest within the Board of Directors, the Appointments and Remuneration Committee
ensures that nominees are upstanding and qualified persons widely recognised for their expertise,
competence, experience, qualifications, training, availability, and commitment to their duties, seeking to
ensure that the selection of candidates results in an appropriate equilibrium of the Board of Directors that
enriches decision-making and contributes multiple points of view to the debate on the matters within its
purview”.
In turn, the Board has entrusted to the Appointments and Remuneration Committee the responsibility of
ensuring that when new vacancies are filled or new directors are appointed, the selection procedures are
free from any implied bias entailing any kind of discrimination and, in particular, from any bias that may
hinder the selection of female directors. This is expressly provided by articles 26.6.d) of the Regulations
of the Board of Directors and 3.d) of the Regulations of the Appointments and Remuneration Committee.
If there are few or no female directors despite any measures adopted, describe
the reasons for such result:
Description of reasons
C.1.7. Explain the form of representation on the board of shareholders with significant
holdings.
24
Mr Xabier de Irala Estévez has been a director since 24 April 2005 at the proposal of the significant
shareholder Bilbao Bizkaia Kutxa, Aurrezki Kutxa eta Bahitetxea - BBK (now Kutxabank, S.A.) and was
last re-elected by the shareholders at the General Shareholders’ Meeting held on 22 June 2012.
C.1.8. Describe, if applicable, the reasons why proprietary directors have been
appointed at the proposal of shareholders whose shareholding interest is less
than 5% of share capital.
Individual or company name of the shareholder
Reason
State whether there has been no answer to formal petitions for presence on the
board received from shareholders whose shareholding interest is equal to or
greater than that of others at whose proposal proprietary directors have been
appointed. If so, describe the reasons why such petitions have not been
answered:
Yes
No
x
Individual or company name of the shareholder
Explanation
C.1.9. State whether any director has withdrawn from the position as such before the
expiration of the director’s term of office, whether the director has given reasons
to the board and by what means, and in the event that the director gave reasons
in writing to the full board, describe at least the reasons given thereby:
Name of the director
Reason for withdrawal
MR MANUEL LAGARES GÓMEZ-ABASCAL
On 10 April 2014, Mr Manuel Lagares GómezAbascal submitted his resignation from the position
he held as proprietary director at the request of the
significant shareholder Banco Financiero y de
Ahorros, S.A. His resignation was due to the sale
by such institution of its shares in Iberdrola on that
same date.
C.1.10. State any powers delegated to the CEO(s):
Individual or company name of the director
Brief description
MR JOSÉ IGNACIO SÁNCHEZ GALÁN
The chairman & chief executive officer, as an
individual decision-making body, has all the powers
that may be delegated under the law and the ByLaws.
C.1.11. Identify any members of the board who are directors or officers of companies
within the listed company’s group:
25
the director
Name of entity
within the group
Position
GALÁN
SCOTTISH POWER, LTD.
Chair
GALÁN
IBERDROLA USA, INC.
Chair
GUERENABARRENA
IBERDROLA ESPAÑA, S.A.
Chair
C.1.12. Identify the directors of your company, if any, who are members of the board of
directors of other companies listed on official stock exchanges other than those
of your group, which have been reported to your company:
the director
Name of listed
company
Position
MR XABIER DE IRALA
ESTÉVEZ
TUBACEX, S.A.
Director
MR BRAULIO MEDEL CÁMARA
ACERINOX, S.A.
Director
MS GEORGINA KESSEL
MARTÍNEZ
GRUPO FINANCIERO
SCOTIABANK INVERLAT, S.A.
DE C.V.
Director
MS DENISE MARY HOLT
HSBC Bank plc
Director
C.1.13. State and, if applicable, explain whether the company has established rules
regarding the number of boards of which its directors may be members:
Yes
x
No
Description of rules
Pursuant to the provisions of articles 36.2 of the By-Laws and 13.b) of the Regulations of the Board of
Directors, “individuals or legal entities serving as directors in more than three companies with shares
trading on domestic or foreign stock exchanges” may not be appointed as directors or individuals
representing a corporate director.
C.1.14. Indicate the company’s general policies and strategies reserved for approval by
the full board:
Yes
Investment and financing policy
x
Definition of the structure of the group of companies
x
Corporate governance policy
x
Corporate social responsibility policy
x
No
26
Strategic or business plan, as well as management objectives and
annual budgets
Policy regarding remuneration and evaluation of performance of
senior management
Risk control and management policy, as well as the periodic
monitoring of the internal information and control systems
Dividend policy, as well the treasury share policy and, especially,
the limits thereto
x
x
x
x
C.1.15. State the overall remuneration of the board of directors:
Remuneration of the board of directors (thousands of euros)
14,951
Amount of total remuneration corresponding to pension rights accumulated by the
directors (thousands of euros)
Overall remuneration of the board of directors (thousands of euros)
14,951
C.1.16. Identify the members of the company’s senior management who are not
executive directors and state the total remuneration accruing to them during the
financial year:
Position(s)
MR FRANCISCO MARTÍNEZ CÓRCOLES
Group Chief Operating Officer
MR JOSÉ SÁINZ ARMADA
Chief Financial Officer
DON JULIÁN MARTÍNEZ-SIMANCAS SÁNCHEZ
General secretary and secretary of the Board of
Directors
MR FERNANDO BECKER ZUAZUA
Corporate director - Spain
MR LUIS JAVIER ARANAZ ZUZA
Director of internal audit
DON PEDRO AZAGRA BLÁZQUEZ
Director of corporate development
MR JUAN CARLOS REBOLLO LICEAGA
Director of administration and control
Total senior management remuneration (in thousands of euros)
10,727
C.1.17. State the identity of the members of the board, if any, who are also members of
the board of directors of significant shareholders and/or in entities of their group:
the director
Company name of the
significant shareholder
Position
MR XABIER DE IRALA
ESTÉVEZ
CAJASUR BANCO, S.A.
Director
27
Describe any significant relationships, other than the ones contemplated in the
prior item, of the members of the board of directors linking them to significant
shareholders and/or companies within their group:
of related director
of related significant
shareholder
Description of relationship
C.1.18. State whether the regulations of the board have been amended during the
financial year:
Yes
x
No
Description of amendments
On 29 April 2014, the Board of Directors of the Company approved an amendment of the Regulations of
the Board of Directors, the new provisions of which are the following:
-
Replacement of mention of the Dividend Policy with a broader reference to the Shareholder
Remuneration Policy.
-
Amendment of the maximum term in office of the chair of the Audit and Risk Supervision Committee
to four years.
On 24 June 2014, the Board of Directors of the Company approved the following changes:
-
Adjustment of the text of its Regulations to the powers that, in the area of investee companies, are
given to the Appointments and Remuneration Committee by the internal procedure for authorising the
appointment of directors at companies in which the Iberdrola Group has an interest.
-
Adjustment of the powers and rules governing the operation of the Corporate Social Responsibility
Committee pursuant to the new foundational structure of the Group.
Finally, the text of the Regulations was updated by the Board of Directors at its meeting of 16
December 2014 in order to adjust the text thereof following completion of the Group’s corporate
reorganisation through the creation of the country subholding company Iberdrola España, S.A.
C.1.19. State the procedures for the selection, appointment, re-election, evaluation, and
removal of directors. List the competent bodies, the procedures to be followed,
and the criteria applied in each of such procedures.
1.
APPOINTMENT OF DIRECTORS
The appointment, re-election and removal of directors is the purview of the shareholders at the General
Shareholders’ Meeting.
Vacancies that occur may be filled by the Board of Directors on an interim basis until the next General
The Appointments and Remuneration Committee must advise the Board of Directors regarding the most
appropriate configuration thereof and of its committees as regards size and equilibrium among the various
classes of directors existing at any time.
The following may not be appointed as directors or individuals representing a corporate director:
a)
Domestic or foreign companies competing with the Company in the energy industry or other
industries, or the directors or senior officers thereof, or such persons, if any, as are proposed by them
in their capacity as shareholders.
b)
Individuals or legal entities serving as directors in more than three companies with shares trading on
domestic or foreign stock exchanges.
c)
Persons who, during the two years prior to their appointment, have occupied high-level positions in
28
the government that are incompatible with the simultaneous performance of the duties of a director of
a listed company under national or autonomous community legislation, or positions of responsibility
with entities regulating the energy industry, the securities markets, or other industries in which the
Company or the Group operates.
d)
Individuals or legal entities that are under any other circumstance of incompatibility or prohibition
governed by provisions of a general nature, including those that have interests in any way opposed
to those of the Company or the Group.
The Board of Directors, and the Appointments and Remuneration Committee within the scope of its
powers, shall endeavour to ensure that the candidates proposed to the shareholders at a General
Shareholders’ Meeting for appointment or re-election as directors, as well as the directors appointed
directly to fill vacancies in the exercise of the power of the Board of Directors to make interim
appointments, are respectable and qualified persons, widely recognised for their expertise, competence,
experience, qualifications, training, availability, and commitment to their duties.
It falls upon the Appointments and Remuneration Committee to propose the independent directors, as
well as to report upon the proposals relating to the other classes of directors.
When the Board of Directors deviates from the proposals and reports of the Appointments and
Remuneration Committee, it shall give reasons for so acting and shall record such reasons in the
minutes.
2.
RE-ELECTION OF DIRECTORS
The proposals for re-election of directors that the Board of Directors resolves to submit to a decision of
the shareholders at the General Shareholders’ Meeting shall be subject to a process of preparation, which
shall include a proposal (in the case of independent directors) or a report (in the case of the other
directors) issued by the Appointments and Remuneration Committee.
For such purposes, the Committee must verify that the director to be re-elected continues to comply with
the general requirements applicable to all directors of the Company pursuant to law and the Company’s
Corporate Governance System, as well as evaluate the quality of work and dedication to office of the
director in question during the preceding term of office and, specifically, such director’s respectability,
capability, expertise, competence, experience, qualifications, availability, and commitment to the duties
entrusted thereto.
3.
EVALUATION OF DIRECTORS
The Board of Directors shall annually evaluate: (i) its operation and the quality of its work; (ii) the
performance of their duties by the chairman of the Board of Directors and by the chief executive officer,
based on the report submitted thereto by the Appointments and Remuneration Committee; and (iii) the
operation of its committees, in view of the report submitted thereto by such committees. For such
purpose, the chairman of the Board of Directors shall organise and coordinate the aforementioned
evaluation process with the chair of each committee. The following section reports on the evaluation
process during financial year 2014.
4.
REMOVAL OF DIRECTORS
Directors “shall serve in their position for a term of four (4) years, so long as the shareholders acting at
the General Shareholders’ Meeting do not resolve to remove them and they do not resign from their
position”.
The Appointments and Remuneration Committee shall inform the Board of Directors regarding proposed
removals due to breach of the duties inherent to the position of director or due to a director becoming
affected by supervening circumstances of mandatory resignation or withdrawal. In addition, the
Committee may propose the removal of directors in the event of incompatibility, structural conflict of
interest, or any other reason for resignation or withdrawal, pursuant to law or the Company’s Corporate
Governance System.
The Board of Directors may propose the removal of an independent director before the passage of the
period provided for in the By-Laws only upon sufficient grounds, evaluated by the Board of Directors after
a report from the Appointments and Remuneration Committee, or as a consequence of public takeover
bids, mergers, or other similar corporate transactions resulting in a significant change in the structure of
the Company’s share capital, as recommended by the Unified Good Governance Code.
C.1.20. State whether the board of directors has performed an evaluation of its activities
during the financial year:
29
Yes
x
No
If so, explain the extent to which the self-evaluation has given rise to significant
changes in its internal organisation and regarding the procedures applicable to
its activities:
Description of amendments
For the evaluation of financial year 2014, the Company has decided to rely, once more, on
“PricewaterhouseCoopers Asesores de Negocios, S.L.” (“PwC”), which prepared the evaluation reports of
which the Board of Directors has taken due note, endorsing the conclusions and the opportunities for
improvement in trends identified by such consultant.
The evaluation process covered more than 400 objectively quantifiable and measurable indicators, which
are updated from year to year with the latest trends. This relates to both the Board of Directors and its
committees as well as the performance of the directors individually. The evaluation of the chairman &
chief executive officer has been led by the coordinating director.
The conclusions of the evaluation reflected excellent results, with compliance with almost all of the critical
indicators related to legal rules and regulations and good governance recommendations, and more than
80% alignment with the latest international trends. There has also been progress in the improvement
areas identified in previous evaluations.
The evaluation highlights its good practices in each of the specific pillars:
1.
Governance model
In 2014 Iberdrola strengthened its governance model based on the separation of the functions of
supervision and management with the creation of the subholding company Iberdrola España, S.A. It
has also progressed in the level of independence of its Board of Directors.
2.
Suitable composition of the Board of Directors and effective operation
During this financial year, Iberdrola progressed towards excellence in the composition of its Board of
Directors with the inclusion of a foreign independent director with experience in the financial industry
and in-depth knowledge of the British market.
3.
Shareholder engagement
Iberdrola has recently approved a Shareholder Engagement Policy, which is a practice that puts it at
the forefront of good governance.
4.
Social return
Iberdrola has strengthened its commitment to and transparency towards society with the first-time
publication of the Integrated Report that has been prepared on the basis of the recommendations of
the International Integrated Reporting Council (IIRC). It has also deepened its involvement with the
stakeholders with whom it relates and has improved the measurement of its corporate reputation.
Pursuant to the Action Plan of which the Board of Directors has taken note, in 2015 Iberdrola will continue
to advance in the adoption of best good governance practices in the following key areas: (i) succession
plan, (ii) shareholder engagement, (ii) best remuneration practices, and (iv) efficiency in the operation of
the governance bodies.
C.1.21. State the circumstances under which the resignation of directors is mandatory.
Directors must submit their resignation from the position and formally resign from their position upon the
occurrence of any of the instances of incompatibility or prohibition against performing the duties of
director provided by law or by Iberdrola’s Corporate Governance System.
In this connection, article 16.2 of the Regulations of the Board of Directors provides that the directors
must submit their resignation to the Board of Directors and formally resign from their position in the
following cases:
a)
When, due to supervening circumstances, they are involved in any circumstance of incompatibility or
prohibition governed by provisions of a general nature, the By-Laws, or these Regulations.
b)
When, as a result of any acts or conduct attributable to the director, serious damage is caused to the
30
value or reputation of the Company or there is a risk to the Company of criminal liability.
c)
When they cease to deserve the respectability or to have the capability, expertise, competence,
availability, or commitment to their duties required to be a director of the Company.
d)
When they are seriously reprimanded by the Board of Directors because they have breached any of
their duties as directors, by resolution adopted by a two-thirds majority of the directors.
e)
When their continuance in office on the Board of Directors may, for any reason, jeopardise directly,
indirectly or through their related persons (pursuant to the definition of this term set forth in these
Regulations), the faithful and diligent performance of their duties in furtherance of the corporate
interest.
f)
When the reasons why the director was appointed cease to exist and, in particular, in the case of
proprietary directors, when the shareholder or shareholders who proposed, requested, or decided the
appointment thereof totally or partially sell or transfer their equity interest, with the result that such
equity interest ceases to be significant or sufficient to justify the appointment.
g)
When an independent director is affected, at any time following the director’s appointment as such,
by any of the prohibitions against holding office provided for in article 10.2 of these Regulations
(incompatibility for the position of independent director).
h)
When the condition of the activities carried out by the director, or of the companies directly or
indirectly controlled by the director, or of the individuals or legal entities that are shareholders of or
related to any of them, or of the individual representing a corporate director, may compromise the
director’s capacity to hold office as such.
The resignation provisions set forth under f) and g) above shall not apply when, after a report from the
Appointments and Remuneration Committee, the Board of Directors believes that there are reasons that
justify the director’s continuance in office, without prejudice to the effect that the new supervening
circumstances may have on the classification of the director.
C.1.22. State whether the powers of the top executive of the company are vested in the
chair of the board. If so, describe the measures that have been taken to mitigate
the risks of accumulation of powers in a single person:
Yes
x
No
Measures to limit risks
It should first be noted that Iberdrola has a corporate structure and a governance model that make it
possible to completely separate the duties of supervision and the duties of management, which avoids the
risk of accumulation of powers.
The following aspects are particularly noteworthy:
a)
Attribution to the Board of Directors of the Company of the duties relating to establishing the Group’s
policies and strategies and the basic guidelines for the management thereof, as well as general
supervision of the development of such policies, strategies, and guidelines, and of decisions on
matters of strategic importance at the Group level.
b)
Attribution to the chairman of the Board of Directors & chief executive officer, with the technical
support of the Operating Committee and the Business CEO (director general de los negocios)
appointed by the Board of Directors (with overall responsibility for all of the businesses of the Group)
and the rest of the management team, of the duty of organisation and strategic coordination within
the Group through the dissemination, implementation, and monitoring of the general strategy and
basic management guidelines established by the Board of Directors.
c)
The function of organisation and strategic coordination is also articulated through country subholding
companies, which group together equity stakes in the business subholding companies at the head of
the business conducted by the Group within the various countries in which it operates, taking into
account the characteristics and unique aspects of each of them.
The country subholding companies also centralise the provision of services common to such
companies and facilitate coordination among them. All of the foregoing is carried out in accordance
with the provisions of applicable law and especially the legal provisions regarding the separation of
regulated activities.
The country subholding companies have boards of directors that include independent directors and
31
their own audit committees, internal audit areas, and compliance units or divisions.
d)
Assumption of decentralised executive responsibilities by the business subholding companies of the
Group, which assume the day-to-day control and administration and the effective management of
each business.
The business subholding companies are organised through their respective boards of directors,
which include independent directors, where appropriate, and their own management decision-making
bodies; they may also have their own audit committees, internal audit areas, and compliance units or
divisions.
In addition, other measures have been adopted in order to mitigate the risks of accumulation of powers:
-
Eleven of the fourteen directors are independent, and all have served as directors for less than
twelve years.
-
The position of lead independent director (consejero independiente especialmente facultado), with
broad powers of supervision regarding the performance of the executive chairman.
-
The Board of Directors meets when so requested by one-fourth of the directors, by a vice-chair, or by
the lead independent director, if any. The meeting must be held within ten days of the request.
-
A meeting of the Board of Directors may be called by one-third of the directors, who must establish
the agenda thereof, in order for the meeting to be held at the place where the registered office is
located, if a prior petition has been submitted to the chairman and he has failed, without well-founded
reasons, to call the meeting within one month.
-
The powers recognised as belonging to the Board of Directors, both in the By-Laws and in its own
Regulations.
-
The duties attributed to the Executive Committee.
-
The same purpose is served by the duties attributed to the Audit and Risk Supervision Committee,
the Appointments and Remuneration Committee, and the Corporate Social Responsibility
Committee.
Specifically, the Appointments and Remuneration Committee is responsible for the annual evaluation
of the chairman’s performance, which is submitted for the approval of the Board of Directors. Such
evaluation is conducted by Ms Inés Macho Stadler, in the performance of her duties as lead
independent director.
-
The General Risk Control and Management Policy described in section E of this report.
-
The activities of cooperation and support entrusted to the Operating Committee within the framework
of the General Risk Control and Management Policy, as set forth in section E of this report.
Finally, the following powers granted to the directors under the Regulations of the Board of Directors are
noteworthy:
-
Each and every director may contribute to the scheduling of meetings of the Board of Directors.
-
Any director may ask the chairman of the Board of Directors to include items on the agenda.
-
A director has the broadest powers to obtain information regarding any aspect of the Company, to
examine its books, records, documents, and other background information on corporate transactions,
to inspect its facilities, and to communicate with the senior officers of the Company.
-
Any director may request the hiring of legal, accounting, technical, financial, commercial, or other
expert advisers, whose services shall be paid for by the Company.
State and, if applicable, explain whether rules have been established whereby one
of the independent directors is authorised to request that a meeting of the board
be called or that new items be included on the agenda, to coordinate and hear the
concerns of external directors, and to direct the evaluation by the board of
directors.
Yes
x
No
Description of rules
As provided by article 38.2 of the By-Laws and article 21 of the Regulations of the Board of Directors, if
the chairman of the Board of Directors performs executive duties, the Board of Directors shall, upon a
32
proposal of the Appointments and Remuneration Committee, authorise a lead independent director
(consejero independiente especialmente facultado) to:
a)
Request the chairman of the Board of Directors to call a meeting thereof when such director deems it
appropriate.
b)
Request the inclusion of matters in the agenda for meetings of the Board of Directors.
c)
Coordinate and reflect the concerns of the external directors.
d)
Lead the evaluation of the chairman of the Board of Directors.
C.1.23. Are qualified majorities, different from the statutory majorities, required to adopt
any type of decision?
Yes
x
No
If so, describe the differences.
The Regulations of the Board of Directors (article 5.1 of the Regulations of the Board of Directors) require
a majority of two-thirds of the directors present at the meeting in person or by proxy to approve the
amendment thereof.
The serious reprimand of a director for having breached any of the duties entrusted thereto as director
(article 16.2.d) of the Regulations of the Board of Directors) requires a qualified majority of two-thirds of
the directors.
C.1.24. Explain whether there are specific requirements, other than the requirements
relating to directors, to be appointed chairman of the board of directors.
Yes
No
x
Description of requirements
C.1.25. State whether the chair has a tie-breaking vote:
Yes
x
No
Matters on which a tie-breaking vote may be cast
Pursuant to article 40.4 of the By-Laws and article 30.7 of the Regulations of the Board of Directors, the
chairman shall, in the event of a tie, have a tie-breaking vote on any matter unless he becomes subject to
a conflict of interest, in which case he must abstain from participating in the deliberation and voting stages
of the respective resolution as provided in article 37 of the aforementioned Regulations.
C.1.26. State whether the by-laws or the regulations of the board set forth any age limit
for directors:
Yes
No
Age limit for the chair
x
33
Age limit for the CEO
Age limit for directors
-
C.1.27. State whether the by-laws or the regulations of the Board establish any limit on
the term of office for independent directors that is different than the term
provided by regulatory provisions:
Yes
No
x
Maximum number of terms
C.1.28. State whether there are formal rules for proxy-voting at meetings of the board of
directors, the manner of doing so, and especially the maximum number of
proxies that a director may hold, as well as whether proxies must be given to a
director of the same class. If so, briefly describe such rules.
Pursuant to article 40.2 of the By-Laws, all of the directors may cast their vote and give their proxy in
favour of another director. Articles 30.2 and 34.2.b) of the Regulations of the Board of Directors require
that directors attend the meetings of the Board of Directors. When directors are unable to attend in person
for well-founded reasons, they shall endeavour to give a proxy to another director, to whom they shall
give any appropriate instructions, but may not grant a proxy in connection with matters in respect of which
they are involved in a conflict of interest.
The proxy granted shall be a special proxy for the Board meeting in question and may be communicated
by any means allowing for the receipt thereof.
There is no maximum number of proxies provided per director or an obligation to give the proxy to the
same class of director.
C.1.29. State the number of meetings that the board of directors has held during the
financial year. In addition, specify the number of times the board has met, if any,
at which the chair was not in attendance. Proxies granted with specific
instructions shall be counted as attendance.
Number of meetings of the board
Number of meetings of the board at which the chair was not in attendance
7
0
State the number of meetings held by the different committees of the board of
directors during the financial year:
Number of meetings of the Executive Committee
Number of meetings of the Audit and Risk Supervision Committee
Number of meetings of the Appointments and Remuneration Committee
Number of meetings of the Corporate Social Responsibility Committee
15
10
14
10
C.1.30. State the number of meetings that the board of directors has held during the
financial year with the attendance of all of its members. Proxies granted with
specific instructions shall be counted as attendance:
Attendance of the directors
% in attendance of total votes during the financial year
7
100%
34
C.1.31. State whether the annual individual accounts and the annual consolidated
accounts that are submitted to the board for approval are previously certified:
Yes
x
No
Identify, if applicable, the person/persons that has/have certified the annual
individual and consolidated accounts of the company for preparation by the
board:
Name
Position
Chairman & CEO
MR JUAN CARLOS REBOLLO LICEAGA
Director of administration and control
C.1.32. Explain the mechanisms, if any, adopted by the board of directors to avoid any
qualifications in the audit report on the annual individual and consolidated
accounts prepared by the board of directors and submitted to the shareholders at
the general shareholders’ meeting.
Articles 3 and 6 of the Regulations of the Audit and Risk Supervision Committee provide that it has the
following functions, among others:

Supervise the process of preparing and presenting regulated financial information.

Establish appropriate relations with the auditor to receive information regarding matters that
might risk the independence thereof, for examination by the Audit and Risk Supervision
Committee, and any other information related to the development of the audit procedure as well
as such other communications as are provided for in the laws on auditing of accounts and in
other legal provisions on auditing. In any event, the Audit and Risk Supervision Committee must
receive written confirmation from the auditor on an annual basis of their independence vis-à-vis
the Company or entities directly or indirectly related thereto, as well as information on additional
services of any kind provided to such entities by such auditor or by persons or entities related
thereto, pursuant to the laws on auditing of accounts.

On an annual basis, prior to the audit report, issue a report containing an opinion on the
independence of the auditor. This report must in any case pass upon the provision of the
additional services referred to in the preceding point.

Report in advance to the Board of Directors regarding the financial information that the Company
must disclose on a regular basis because of its status as a listed company; the Audit and Risk
Supervision Committee shall make sure that the interim accounts are prepared in accordance
with the same accounting standards as the annual accounts and, for such purpose, it shall
consider the appropriateness of a limited review by the auditor.

Review the contents of the audit reports on the accounts and of the reports on the limited review
of interim accounts, if any, as well as other mandatory reports to be prepared by the auditor,
prior to the issuance thereof, in order to avoid qualified reports.

Act as a channel of communication between the Board of Directors and the auditors.
Article 48.5 of the Regulations of the Board of Directors provides that the Board of Directors shall use its
best efforts to definitively prepare the accounts such that there is no room for qualifications by the auditor.
However, when the Board of Directors believes that its opinion must prevail, it shall provide a public
explanation of the content and scope of the discrepancy.
Pursuant to the above-cited articles, the Audit and Risk Supervision Committee reports on the financial
information of the Company throughout the financial year and prior to the approval thereof by the Board of
Directors and its submission to the National Securities Market Commission (Comisión Nacional del
Mercado de Valores) (CNMV). The reports of the Audit and Risk Supervision Committee, which the chair
thereof presents to the full Board of Directors, are mainly intended to disclose such aspects, if any, as
35
may give rise to qualifications in the audit report of Iberdrola and its consolidated group, making the
appropriate recommendations to avoid any such qualifications.
Accordingly, the Audit and Risk Supervision Committee submitted to the Board of Directors the following
reports regarding the annual and semi-annual financial reports and the interim management statements
of the Company for financial year 2014:

Report dated 28 April 2014 on the interim management statement for the first quarter of 2014.

Report dated 21 July 2014 on the economic/financial report for the first half of 2014.

Report dated 20 October 2014 on the interim management statement for the third quarter of
2014.

Report dated 16 February 2015 on the annual accounts of Iberdrola and its consolidated group
for financial year 2014.
As disclosed in the information about Iberdrola posted on the website of the CNMV (www.cnmv.es), the
audit reports on the individual and consolidated annual accounts prepared by the Board of Directors have
historically been issued without qualifications.
C.1.33. Is the secretary of the board a director?
Yes
No
x
C.1.34. Describe the procedures for appointment and removal of the secretary of the
board, stating whether the appointment and removal thereof have been reported
upon by the appointments committee and approved by the full board.
Procedure for appointment and removal
Pursuant to the provisions of article 22.1 of the Regulations of the Board of Directors, the Board of
Directors shall appoint its secretary at the proposal of the chairman and after a report from the
Appointments and Remuneration Committee. The same procedure shall be followed to decide the
removal of the secretary.
Does the appointments committee report on the appointment?
Does the appointments committee report on the removal?
Does the full board approve the appointment?
Does the full board approve the removal?
Yes
x
x
x
x
No
Is the secretary of the board especially responsible for ensuring compliance with
good governance recommendations?
Yes
x
No
Comments
Under section 17.d) of the General Corporate Governance Policy, further developed by article 22.4.b) of
the Regulations of the Board of Directors, the secretary has the duty to ensure the formal and substantive
legality of all actions taken by the collective management decision-making bodies and conformity thereof
with the Company’s Corporate Governance System. To such end, the secretary of the Board of Directors
shall take into account, among other things, the provisions issued by regulatory authorities and their
recommendations, if any.
Among other duties, the secretary is also responsible for advising on the evaluation and update of the
Corporate Governance System and for reporting on new corporate governance initiatives at the domestic
and international levels.
36
C.1.35. State the mechanisms, if any, used by the company to preserve the independence
of auditors, financial analysts, investment banks, and rating agencies.
1.
MECHANISMS TO PRESERVE THE INDEPENDENCE OF THE AUDITOR

The Audit and Risk Supervision Committee shall receive information from the auditor regarding
matters that might risk the independence thereof.

This Committee shall receive from the auditors, on an annual basis, written confirmation of their
independence as well as information on additional services provided to the Company or entities
related thereto.

The auditor shall provide to the Audit and Risk Supervision Committee annual information
regarding the profiles and the track record of the persons making up the audit teams, stating the
changes in the composition of such teams compared to the preceding financial year and persons
added to the Iberdrola Group.

Such Committee shall issue, on an annual basis and prior to the issuance of the audit report, a
report containing an opinion on the independence of the auditor. This report shall in any case
pass upon the provision of the additional services referred to above.

The Audit and Risk Supervision Committee shall monitor the quality assurance and
independence safeguarding internal procedures implemented by the auditor.

This Committee shall not submit a proposal to the Board of Directors, and the Board of Directors
shall not submit a proposal to the shareholders at a General Shareholders’ Meeting, for
appointment of firms as auditor when it has evidence that they are affected by a circumstance of
incompatibility or do not satisfy the independence requirements established by the Company’s
Corporate Governance System.
As a result thereof, during 2014:

Iberdrola’s auditor appeared on 8 occasions before the Audit and Risk Supervision Committee to
report on various matters relating to the audit process; no issues arose during such appearances
that might put its independence at risk.

On 11 February 2014, the auditor sent written confirmation of its independence with regard to the
audit of financial information for financial year 2013. In addition, on 21 July 2014, the auditor sent
written confirmation of its independence with regard to the limited review of financial information
through 30 June 2014. The auditor represented in such letters that it had implemented the
internal procedures necessary to ensure its independence.

Contracting of the auditor for services other than auditing is authorised in advance by the Audit
and Risk Supervision Committee. Such contracting is supported by the respective letters of the
partner responsible for the audit confirming the non-existence of restrictions on independence to
perform this work.

In its written confirmation of 11 February 2014, the auditor reported on the rotation of personnel
of the audit team responsible for auditing the accounts of the Company, stating that none of
them have joined the Company or its Group.

On 17 February, the Audit and Risk Supervision Committee issued its report to the Board of
Directors regarding the independence of the Company’s auditor. The Committee concluded that
the auditor performed its audit work with independence from the Company or entities related
thereto.

2.
Finally, pursuant to the points above, on 17 February 2014, the Audit and Risk Supervision
Committee proposed to the Company’s Board of Directors, for submission to the shareholders at
the General Shareholders’ Meeting, the re-election of Ernst & Young as the Company’s auditor
for financial year 2014.
MECHANISMS TO PRESERVE THE INDEPENDENCE OF FINANCIAL ANALYSTS, INVESTMENT
BANKS, AND RATING AGENCIES
The principles which form the basis of the relations of the Company with financial analysts, investment
banks, and rating agencies are transparency, non-discrimination, truthfulness, and trustworthiness of the
information supplied. The Finance and Resource Division, through the Investor Relations Division,
manages their requests for information and requests submitted by institutional or retail investors (in the
case of retail investors, through the Office of the Shareholder). The Finance and Resource Division gives
mandates to investment banks. The Development Division gives the appropriate advisory mandates to
37
investment banks within the scope of its activities, in coordination with the Finance and Resource
Division.
The independence of financial analysts is protected by the Investor Relations Division, which ensures the
objective, fair, and non-discriminatory treatment thereof.
To actualise the principles of transparency and non-discrimination, always in strict compliance with
regulations regarding the Securities Market, the Company has a number of communication channels:
-
Personalised assistance for analysts, investors, and rating agencies.
-
Publication of the information relating to quarterly results and other specific events, such as those
relating to the submission of the Business Prospects or to corporate transactions.
-
E-mail through the corporate website ([email protected]) and a toll-free line for
shareholders (+34 900 100 019).
-
In-person and broadcast presentations.
-
Release of announcements and news.
-
Visits to Company facilities.
C.1.36. State whether the Company has changed the external auditor during the financial
year. If so, identify the incoming and the outgoing auditor:
Yes
No
x
Outgoing auditor
Incoming auditor
If there has been any disagreement with the outgoing auditor, provide a
description thereof:
Yes
No
x
Description of the disagreement
C.1.37. State whether the audit firm performs other non-audit work for the company
and/or its group. If so, state the amount of the fees paid for such work and the
percentage they represent of the aggregate fees charged to the company and/or
its group:
Yes
x
No
Company
Amount of other non-audit work
(thousands of euros)
Amount of non-audit work / Aggregate
amount billed by the audit firm (%)
Group
Total
205
849
1,054
5.8
7.1
6.8
C.1.38. State whether the audit report on the annual accounts for the prior financial year
has observations or qualifications. If so, state the reasons given by the chair of
the audit committee to explain the content and scope of such observations or
qualifications.
38
Yes
No
x
Description of reasons
C.1.39. State the consecutive number of years for which the current audit firm has been
auditing the annual accounts of the company and/or its group. In addition, state
the percentage represented by such number of financial years audited by the
current audit firm with respect to the total number of financial years in which the
annual accounts have been audited:
Company
Group
9
9
Company
Group
41
41
Number of continuous financial years
Number of years audited by the current audit firm
/ Number of years in which the company has been
audited (%)
C.1.40. State whether there is any procedure for directors to hire external advisory
services, and if so, describe it:
Yes
x
No
Describe the procedure
Pursuant to the provisions of article 33 of the Regulations of the Board of Directors, in order to be
assisted in the performance of the duties entrusted thereto, any director may request the hiring of legal,
accounting, technical, financial, commercial, or other expert advisers, whose services shall be paid for by
the Company.
The assignment must deal with specific issues of certain significance and complexity arising during the
performance of the director’s duties.
The request for an expert to be hired shall be channelled through the secretary of the Board of Directors,
who may subject it to the prior approval of the Board of Directors; such approval may be denied in wellfounded instances, including the following circumstances:
a)
That it is not necessary for the proper performance of the duties entrusted to the directors.
b)
That the cost thereof is not reasonable in light of the significance of the issues and the assets and
income of the Company.
c)
That the technical assistance sought may be adequately provided by the Company’s own experts
and technical personnel.
d)
That it may entail a risk to the confidentiality of the information that must be made available to the
expert.
Furthermore, article 25.2 of the Regulations of the Audit and Risk Supervision Committee, article 19.2 of
the Regulations of the Appointments and Remuneration Committee, and article 16.3 of the Regulations of
the Corporate Social Responsibility Committee provide that such committees may seek advice from
outside professionals, who shall submit their reports directly to the chair of the relevant committee.
C.1.41. State whether there is any procedure for directors to obtain sufficiently in
advance the information required to prepare for meetings of management-level
decision-making bodies and, if so, describe it:
39
Yes
x
No
Describe the procedure
Section 13 of the General Corporate Governance Policy provides that “the Company has a programme to
provide directors with information and updates in response to the need for professionalisation,
diversification, and qualification of the Board of Directors.
Furthermore, in order to improve their knowledge of the Group, presentations are made to the directors in
connection with the business of this Group. In addition, at each meeting of the Board of Directors, a
specific portion of the meeting may be devoted to a presentation on legal, economic, environmental, or
social matters of significance to the Group.
The directors have access to a specific application, the directors’ website, that facilitates performance of
their duties and the exercise of their right to receive information. Such information as is deemed
appropriate for the preparation of meetings of the Board of Directors and the committees thereof in
accordance with the agenda set forth in the respective calls, as well as materials relating to the director
training programmes and the presentations made to the Board of Directors, shall be posted on such
website.
In addition, the minutes of meetings of the Board of Directors and of the committees thereof, once duly
approved, or an abstract or summary thereof, shall be posted on the directors’ website, as well as such
information as the Board of Directors may decide to include therein”.
For its part, article 28.4 of the Regulations of the Board of Directors, in further development of article 39.2
of the By-Laws, provides that any information deemed necessary shall be sent or made available through
the directors’ website together with the call to meetings of the Board of Directors, which shall always
include the agenda for the meeting unless the requirement may be dispensed with upon duly justified
grounds.
In addition, article 34.2.a) of the Regulations of the Board of Directors provides that a director is
specifically required to "properly prepare the meetings of the Board of Directors and, if applicable, the
meetings of the Executive Committee or of the committees of which the director is a member, for which
purposes the director must diligently become apprised of the running of the Company and the matters to
be discussed at such meetings”.
In order to facilitate the directors’ discharge of their duties, the following initiatives have been
implemented:
-
The approval by the Board of Directors of the Directors’ Code of Ethics of Iberdrola, which provides
the directors with an overall view of the rights and duties inherent in their position and is continuously
updated.
-
The directors’ website, on which the call to and the documents for preparation of each meeting of the
Board of Directors are published.
-
The development of the programme for information to the directors of Iberdrola pursuant to article
12.4 of the Regulations of the Board of Directors, which seeks to achieve the ongoing update of
directors and consists of presentations, informational notes, and posts that are included in the
directors’ website regarding matters of interest to the directors of the Company, issues of general
interest, and specific information on corporate governance and corporate social responsibility.
-
The holding of informational meetings led by officers and employees of the Group, at which
information is provided regarding activities related to the various business and corporate areas of the
Company, as well as training presentations delivered by well-known professionals from outside the
Company, at which the directors receive information on matters of topical interest.
C.1.42. State whether the company has established any rules requiring directors to
inform the company —and, if applicable, resign from their position— in cases in
which the credit and reputation of the company may be damaged, and if so
provide a detailed description:
Yes
x
No
Describe the rules
Section 14 of the General Corporate Governance Policy sets out the obligations and duties of the
40
directors, including, as a statement of the duty of loyalty, the duty to resign in the event of supervening
incompatibility, lack of competence, prohibition against holding office as a director, and other instances
provided for in the Company’s Corporate Governance System. As provided by sub-sections c) and d) of
article 42.2 of the Regulations of the Board of Directors, a director must inform the Company of any
judicial, administrative, or other proceedings instituted against the director which, because of their
significance or characteristics, may seriously reflect upon the reputation of the Company. In particular, if a
director becomes subject to an order for further criminal prosecution upon indictment (resultar procesado)
or an order for the commencement of an oral trial is issued against the director for the commission of any
of the crimes contemplated in section 213 of the Companies Act (Ley de Sociedades de Capital), such
director shall give notice thereof to the Company, in the person of its president. In such instance, the
Board of Directors shall review the case as soon as practicable and shall adopt the decisions it deems fit
taking into account the interests of the Company.
In addition, the director must inform the Company of any fact or event that may be relevant to the holding
of office as a director.
In addition, directors must submit their resignation to the Board of Directors and formally resign from their
position in the events set forth in article 16.2 of the Regulations of the Board of Directors, particularly:
a) When, due to supervening circumstances, they are involved in any circumstance of incompatibility or
prohibition governed by provisions of a general nature, the By-Laws, or these Regulations.
b) When, as a result of any acts or conduct attributable to the director, serious damage is caused to the
value or reputation of the Company or there is a risk to the Company of criminal liability.
c) When they cease to deserve the respectability or to have the capability, expertise, competence,
availability, or commitment to their duties required to be a director of the Company.
d) When they are seriously reprimanded by the Board of Directors because they have breached any of
their duties as directors, by resolution adopted by a two-thirds majority of the directors.
e) When their continuance in office on the Board of Directors may, for any reason, jeopardise directly,
indirectly or through their related persons (pursuant to the definition of this term set forth in these
Regulations), the faithful and diligent performance of their duties in furtherance of the corporate
interest.
f) When the reasons why the director was appointed cease to exist and, in particular, in the case of
proprietary directors, when the shareholder or shareholders who proposed, requested, or decided the
appointment thereof totally or partially sell or transfer their equity interest, with the result that such
equity interest ceases to be significant or sufficient to justify the appointment.
g) When an independent director is affected, at any time following the director’s appointment as such, by
any of the prohibitions against holding office provided for in article 10.2 of these Regulations.
h) When the condition of the activities carried out by the director, or of the companies directly or
indirectly controlled by the director, or of the individuals or legal entities that are shareholders of or
related to any of them, or of the individual representing a corporate director, may compromise the
director’s capacity to hold office as such.
In any of the instances set forth in section 2 of article 16 of the Regulations of the Board of Directors, the
Board of Directors shall request the director to resign from such position and, if applicable, shall propose
the director’s removal from office to the shareholders at the General Shareholders’ Meeting.
By way of exception, the resignation provisions set forth in letters f) and g) of article 16.2 of the
Regulations of the Board of Directors cited above shall not apply when, after a report from the
Appointments and Remuneration Committee, the Board of Directors believes that there are reasons that
justify the director’s continuance in office, without prejudice to the effect that the new supervening
circumstances may have on the classification of the director.
C.1.43. State whether any member of the board of directors has informed the company
that such member has become subject to an order for further criminal
prosecution upon indictment or that an order for the commencement of a bench
trial has been issued against such member for the commission of any of the
crimes contemplated in section 213 of the Companies Act:
Yes
No
Name of the director
x
Criminal case
Comments
41
State whether the board of directors has analysed the case. If so, provide a duly
substantiated explanation of the decision adopted regarding whether or not the
director should remain in office or, if applicable, describe the actions taken by the
board of directors through the date of this report or that it plans to take.
Yes
No
Decision made / action taken
Duly substantiated explanation
C.1.44. Describe the significant agreements entered into by the company that go into
effect, are amended, or terminate in the event of a change in control at the
company as a result of a takeover bid, and effects thereof.
Iberdrola and its dependent companies (reference to dependent company should be understood to mean
that the change in control clause refers thereto) have loans and other agreements with financial
institutions, the maturity of which may be affected in the event of a change in control, with the most
significant of such agreements being the following:
i.
There are loans that may be accelerated or require additional collateral if there is a change
in control due to a public takeover bid, which as a whole represent approximately 1,711
million euros by agreements affected, unless the change in control is not considered to be
prejudicial.
ii.
Similarly, approximately 1,039 million Brazilian reais in issuances and 729 million Brazilian
reais in loans corresponding to Elektro would be affected by a change in control of the
issuer, unless it occurs as a result of an intra-group reorganisation or is agreed to by the
lenders.
iii.
Furthermore, approximately 9,054 million euros corresponding to the issue of securities in
the euromarket would be susceptible to acceleration in the event of a change in control if
Iberdrola’s credit rating falls below “investment grade” or, if already below that level, falls a
notch, provided that the rating agency states that the downgrade in credit rating is due to the
change in control.
iv.
Finally, approximately 943 million euros, 568 million dollars corresponding to Iberdrola
Mexico, 286 million Brazilian reais (Elektro) for loans, and 1,150 million dollars for issues by
the Iberdrola Group in the USA would be susceptible to acceleration in the event of a
change in control of the borrower.
C.1.45. Identify on an aggregate basis and provide a detailed description of the
agreements between the company and its management level and decisionmaking positions or employees that provide for indemnities, guarantee, or
“golden parachute” clauses upon resignation or termination without cause, or if
the contractual relationship is terminated as a result of a takeover bid or other
type of transaction.
Number of beneficiaries
62
Type of beneficiary
Description of agreement
Executive directors
Pursuant to the provisions of his contract, the
chairman & chief executive officer has the right to
receive a severance payment in the event of
42
termination of his relationship with the Company,
provided that such termination is not the
consequence of a breach attributable thereto or
exclusively due to his own decision to withdraw.
The amount of the severance payment is three
times annual salary.
Furthermore, in consideration for his two-year noncompete commitment, the chairman & chief
executive officer is entitled to severance equal to
the remuneration for that period.
Since 2011, the Director Remuneration Policy
provides that the limit on the amount of such
severance under new contracts with executive
directors shall be two times their annual salary.
Contracts with senior officers of Iberdrola include
specific severance clauses. The purpose of such
clauses is to obtain an effective and sufficient level
of loyalty from senior officers who are necessary
for the management of the Company and thus
avoid a loss of experience and knowledge that
might jeopardise the achievement of strategic
objectives. The amount of the severance is
determined based on length of service and the
reasons for the senior officer’s withdrawal from
office, up to a maximum of five times annual salary.
Senior officers
Notwithstanding the foregoing, the Senior Officer
Remuneration Policy provides since 2011 that the
limit on the amount of the severance under new
contracts with senior officers shall be two times
their annual salary.
The contracts of employees linked to Iberdrola by
an ordinary employment relationship do not
generally include specific severance clauses and,
accordingly, the general provisions of labour law
shall apply in the event of termination of the
employment relationship.
Employees
State whether such agreements must be reported to and/or approved by the
decision-making bodies of the company or its group:
Board of directors
Decision-making body
approving the provisions
General shareholders’ meeting
X
Yes
Is information about these provisions provided to the
shareholders at the general shareholders’ meeting?
C.2.
No
x
Committees of the board of directors
C.2.1. Describe all of the committees of the board of directors, the members thereof,
and the proportion of proprietary and independent directors of which they are
comprised:
43
EXECUTIVE COMMITTEE
Name
Position
Class
GALÁN
CHAIR
Executive director
MR XABIER DE IRALA
ESTÉVEZ
MEMBER
Proprietary director
MS INÉS MACHO STADLER
MEMBER
Independent director
GUERENABARRENA
MEMBER
Other external director
MR ÁNGEL JESÚS ACEBES
PANIAGUA
MEMBER
% executive directors
20.00
% proprietary directors
20.00
% independent directors
40.00
% other external
20.00
AUDIT AND RISK SUPERVISION COMMITTEE
Name
Position
Class
MR JULIO DE MIGUEL AYNAT
CHAIR
MR SEBASTIÁN BATTANER
ARIAS
MEMBER
MS GEORGINA KESSEL
MARTÍNEZ
MEMBER
MS DENISE MARY HOLT
MEMBER
0
0
100.00
% other external
0
APPOINTMENTS AND REMUNERATION COMMITTEE
Name
Position
Class
CHAIR
MR IÑIGO VÍCTOR DE ORIOL
IBARRA
MEMBER
44
MR SANTIAGO MARTÍNEZ
LAGE
MEMBER
0
0
100.00
% other external
0
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
Name
Position
Class
MS SAMANTHA BARBER
CHAIR
MEMBER
MS MARÍA HELENA ANTOLÍN
RAYBAUD
MEMBER
0
0
100.00
% other external
0
C.2.2. Complete the following table with information regarding the number of female
directors comprising the committees of the board of directors for the last four
financial years:
Year t
%
Executive
Committee
Audit and Risk
Supervision
Committee
Appointments
and
Remuneration
Committee
Corporate Social
Responsibility
Committee
Number of female directors
Year t-1
Year t-2
%
%
Year t-3
%
20.00
20.00
16.66
16.66
50.00
33.33
0.00
0.00
33.33
33.33
33.33
33.33
66.66
66.66
66.66
50.00
C.2.3. State whether the audit committee has the following duties:
45
Yes
Supervise the process of preparation and the integrity of the financial
information relating to the company and, if applicable, to the group,
monitoring compliance with legal requirements, the proper delimitation
of the scope of consolidation, and the correct application of
accounting principles.
Periodically review the internal control and risk management systems,
in order for the main risks to be properly identified, managed, and
made known.
Ensure the independence and effectiveness of the internal audit area;
make proposals regarding the selection, appointment, re-election, and
withdrawal of the head of the internal audit area; propose the budget
for such area; receive periodic information regarding its activities; and
verify that senior management takes into account the conclusions and
recommendations contained in its reports.
Establish and supervise a mechanism whereby the employees may
give notice, on a confidential basis and, if deemed appropriate,
anonymously, of any potentially significant irregularities, especially of
a financial and accounting nature, that they notice at the company.
Submit to the board proposals for the selection, appointment, reelection, and replacement of the external auditor, as well as the
contractual terms under which it should be hired.
Regularly receive from the external auditor information regarding the
audit plan and the results of the implementation thereof, and verify that
senior management takes its recommendations into account.
Ensure the independence of the external auditor.
No
x
x
x
x
x
x
x
C.2.4. Describe the rules of organisation and operation of, and the duties assigned to,
each of the board committees.
1.
EXECUTIVE COMMITTEE
The Executive Committee shall be composed of the number of members decided by the Board of
Directors, with a minimum of four and a maximum of eight. In all cases, members shall include the
chairman of the Board of Directors, and the chief executive officer, if any. The secretary of the Board of
Directors shall act as secretary for the meeting.
The Executive Committee shall meet as many times as deemed necessary by the chair thereof. It shall
also meet when so requested by a minimum of two of the directors sitting on the committee.
Resolutions of the Committee shall be adopted by absolute majority of its members who are present at
the meeting in person or by proxy.
The duties of this Committee consist of making proposals to the Board regarding strategic decisions,
investments, and divestitures that are significant for the Company or the Group, assessing their
conformity to the budget and the strategic plans and analysing and monitoring business risks.
2.
The Audit and Risk Supervision Committee is an internal informational and consultative body.
The Audit and Risk Supervision Committee shall be composed of a minimum of three and a maximum of
five directors appointed from among the external directors who are not members of the Executive
Committee. A majority of such directors shall be independent, and at least one of them shall be appointed
taking into account the knowledge and experience thereof in the areas of accounting, audit, and risk
management.
The Board of Directors shall appoint a chair of the Committee from among the independent directors
forming part thereof, as well as its secretary, who need not be a director.
The members of the Audit and Risk Supervision Committee shall be appointed for a maximum term of
four years and may be re-elected on one or more occasions for terms of the same maximum length. The
46
chair shall hold office for a maximum period of four years, after which period the director who has held
office as such may not be re-elected until the passage of at least one year from ceasing to act as such.
A valid quorum shall be established with the attendance at the meeting, in person or by proxy, of a
majority of its members, and resolutions shall be adopted by an absolute majority of votes of the
members present at the meeting in person or by proxy.
The duties of the Committee are provided in article 44 of the By-Laws and are further developed in article
25 of the Regulations of the Board of Directors, as well as in the Regulations of the Audit and Risk
Supervision Committee.
3.
The Appointments and Remuneration Committee is an internal informational and consultative body.
The Appointments and Remuneration Committee shall be composed of a minimum of three and a
maximum of five directors appointed from among the external directors, and the majority thereof must be
classified as independent. The Board of Directors also appoints the chair thereof from among the
independent directors forming part thereof, as well as its secretary, who need not be a director.
The members of the Appointments and Remuneration Committee shall be appointed for a maximum term
of four years and may be re-elected on one or more occasions for terms of the same maximum length.
26 of the Regulations of the Board of Directors, as well as in the Regulations of the Appointments and
Remuneration Committee.
4.
The Corporate Social Responsibility Committee is an internal informational and consultative body.
The Committee shall be composed of a minimum of three and a maximum of five directors appointed from
among the external directors, and the majority thereof must be classified as independent. The Board of
Directors shall appoint a chair of the Committee from among the members forming part thereof, as well as
its secretary, who need not be a director.
The members of the Corporate Social Responsibility Committee shall be appointed for a maximum term
of four years and may be re-elected on one or more occasions for terms of the same maximum length.
27 of the Regulations of the Board of Directors, as well as in the Regulations of the Corporate Social
Responsibility Committee.
As a general rule, the chairs of the Appointments and Remuneration Committee, of the Corporate Social
Responsibility Committee, and of the Audit and Risk Supervision Committee shall report to the Board of
Directors on the business considered and the resolutions adopted at the meetings thereof at the first
meeting of the Board of Directors following those of the respective committee.
C.2.5. State, if applicable, the existence of regulations of the board committees, where
such regulations may be consulted, and the amendments made during the
financial year. Also state if any annual report of the activities performed by each
committee has been voluntarily prepared.
1.
The Audit and Risk Supervision Committee has its own Regulations, which may be viewed by interested
parties on the Company’s website (www.iberdrola.com).
Article 20.2 of the Regulations of the Audit and Risk Supervision Committee provides that within three
47
months following the end of each financial year of the Company, the Committee shall submit to the Board
of Directors for approval a report describing its work during the financial year covered by such report,
which shall be made available to the shareholders on occasion of the call to the annual General
The Report for financial year 2014 was prepared by the Audit and Risk Supervision Committee at its
meeting of 16 January 2015.
2.
The Appointments and Remuneration Committee has its own Regulations, which may be viewed by
interested parties on the Company’s corporate website (www.iberdrola.com).
Article 21.2 of the Regulations of the Appointments and Remuneration Committee provides that within
three months following the end of the Company’s financial year, the Committee shall submit to the Board
of Directors for approval a report detailing its work for the financial year covered by the report.
The Report for financial year 2014 was prepared by the Appointments and Remuneration Committee at
its meeting of 19 January 2015.
3.
The Corporate Social Responsibility Committee has its own Regulations, which may be viewed by
interested parties on the Company’s corporate website (www.iberdrola.com).
Article 18.2 of the Regulations of the Corporate Social Responsibility Committee provides that within three
months following the end of each financial year of the Company, the Committee shall submit to the Board
of Directors for approval a report on its activities during the financial year covered by the report.
The Report for financial year 2014 was prepared by the Corporate Social Responsibility Committee at its
meeting of 19 January 2015.
An Activities Report of the Consultative Committees is published for purposes of the call to the General
C.2.6. State whether the composition of the executive committee reflects the
participation of the different directors within the board based on their category:
Yes
No
x
If no, explain the composition of your executive committee
The Executive Committee of Iberdrola is made up of five directors, one being an executive director, one
being a proprietary director, two being independent directors, and finally one classified as other external
director.
Iberdrola believes it is essential for both the executive directors and the proprietary director to be part of
the Executive Committee. The presence of two independent directors, including the lead independent
director (consejera independiente especialmente facultada), provides an appropriate balance in the
composition thereof, with representation of the various classes of directors of the Company, and also
ensures that the duties of the Executive Committee may not be performed along lines different from those
reflected by the composition of the Board of Directors.
48
D. RELATED-PARTY TRANSACTIONS AND INTRAGROUP TRANSACTIONS
D.1.
Identify the competent decision-making body and describe any procedures for
approving related-party and intragroup transactions.
Competent decision-making body for approving related-party transactions
The Board of Directors, or in urgent cases, the Executive Committee.
Procedure for the approval of related-party transactions
Article 41 of the Regulations of the Board of Directors provides that:
1. Any transaction by the Company or the companies forming part of its Group with directors, with
shareholders that own a shareholding interest that is equal to or greater than that legally regarded as
significant at any time or that have proposed the appointment of any of the directors of the Company,
or with the respective related persons, shall be subject to the approval of the Board of Directors, or in
urgent cases, of the Executive Committee, following a favourable report from the Appointments and
Remuneration Committee. In the event that authorisation has been granted by the Executive
Committee due to the urgency of the matter, the Executive Committee shall give notice thereof to the
Board of Directors at the next meeting thereof.
2. The Board of Directors, through the Appointments and Remuneration Committee, shall ensure that
transactions between the Company or the companies forming part of its Group and the directors, the
shareholders mentioned in the preceding section, or the respective related persons are carried out
under arm’s length conditions and with due observance of the principle of equal treatment of
shareholders in the same situation.
3. In the case of customary and recurring transactions in the ordinary course of business, it shall be
sufficient for the Board of Directors to give prior generic approval of the kind of transaction and of the
conditions for performance thereof, following a favourable report from the Appointments and
Remuneration Committee.
4. However, no authorisation of the Board of Directors shall be required in connection with transactions
that simultaneously satisfy the following three conditions: that they are conducted under contracts
whose terms and conditions are standardised and apply on an across-the-board basis to a large
number of customers; that they are conducted at prices or rates established generally by the party
acting as supplier of the goods or services in question, and that the amount thereof does not exceed
one per cent of the annual income of the Company, as reflected in the audited annual accounts for the
most recent financial year closed prior to the date of the transaction in question.
5. The Company shall report the transactions mentioned in this article in the Semi-annual Financial
Report and in the Annual Corporate Governance Report, in those cases and to the extent provided for
by law. Likewise, the Company shall include in the notes accompanying the annual accounts
information regarding the transactions by the Company or by the companies that form part of the
Group with the directors and those persons who act for the account of the latter when such
transactions are conducted other than in the ordinary course of the Company’s business or other than
under arm’s length conditions.
Similar terms are provided in article 42 of the Procedure for Conflicts of Interest and Related-Party
Transactions with Directors, Significant Shareholders, and Senior Officers. Articles 15 and 16 of this
Procedure govern transactions with related persons other than directors and significant shareholders. In
such cases, authorisation of the related-party transaction is within the purview of the Corporate
Resources Division.
Explain whether the approval of related-party transactions has been delegated,
and if so, state the body or persons to which the delegation has been made.
49
D.2.
Describe those transactions that are significant due to the amount or subjectmatter thereof between the company or entities of its group and the company’s
significant shareholders:
Individual or
company
name of the
significant
shareholder
Individual or
company
name of the
company or
entity within its
group
Nature of
the
relationship
Type of
transaction
Amount
(thousands
of euros)
KUTXABANK, S.A.
IBERDROLA
Contractual
Interest charged
45
KUTXABANK, S.A.
IBERDROLA
Contractual
Receipt of services
479
KUTXABANK, S.A.
IBERDROLA
Contractual
Interest charged
11
KUTXABANK, S.A.
IBERDROLA
Corporate
Dividends and other
distributed benefits
93,278
KUTXABANK, S.A.
IBERDROLA GROUP
Contractual
Interest charged
227
KUTXABANK, S.A.
IBERDROLA GROUP
Contractual
Receipt of services
56
KUTXABANK, S.A.
IBERDROLA GROUP
Contractual
Interest charged
11
KUTXABANK, S.A.
IBERDROLA GROUP
Contractual
Financing
agreements: loans
6,601
KUTXABANK, S.A.
IBERDROLA GROUP
Contractual
Security and bonds
2,246
QATAR INVESTMENT
AUTHORITY
IBERDROLA
Corporate
Dividends and other
distributed benefits
244,543
D.3.
Describe those transactions that are significant due to the amount or subjectmatter thereof between the company or entities of its group and the company’s
directors or officers:
Individual or
company
name of
directors
or officers
Individual or
company name
of related party
Relation
Nature of
the relationship
Amount
(thousands of
euros)
Mr Íñigo Íñigo
Víctor de Oriol
Ibarra
Soil Tratamiento
de Aguas
Industriales, S.L
Direct (23.4%) and
indirect (39.4%)
control
Receipt of
services
1,695
D.4.
Report the significant transactions made by the company with other entities
belonging to the same group, provided they are not eliminated in the preparation
of the consolidated accounts and they are not part of the ordinary course of
business of the company as to their purpose and conditions.
Name of the entity within
the group
Amount
(thousands of
euros)
Brief description of the transaction
50
Name of the entity within
the group
Amount
(thousands of
euros)
Gamesa Group
Gamesa Group
Gamesa Group
Gamesa Group
65,398
200,277
5
1,550
Brief description of the transaction
Receipt of services
Purchase of tangible assets
Operating lease agreements
Sale of goods (finished or in progress)
In any case, report any intragroup transaction with entities established in
countries or territories considered to be tax havens:
Name of the
entity within the group
transaction
Amount
(thousands of euros)
Scottish Power Insurance Ltd
Financial interest income
297
Scottish Power Insurance Ltd
Loan
431
Damhead Creek Finance Ltd
Provision of loan
37,343
D.5.
State the amount of transactions with other related parties.
D.6.
Describe the mechanisms used to detect, determine, and resolve potential
conflicts of interest between the company and/or its group, and its directors,
officers, or significant shareholders.
1.
CONFLICTS OF INTEREST GENERALLY
As part of its Corporate Governance System, Iberdrola has adopted a Procedure for Conflicts of Interest
and Related-Party Transactions with Directors, Significant Shareholders, and Senior Officers (in this
section, the “Procedure”).
The Procedure further develops the provisions of the Regulations of the Board of Directors and the
Internal Regulations for Conduct in the Securities Markets, in order to specify the rules to be observed in
conflict of interest situations. It applies to directors, significant shareholders, senior officers, other persons
designated by the Compliance Unit, and their related persons, upon the terms expressly defined in the
Procedure itself.
2.
CONFLICTS OF INTEREST BETWEEN THE COMPANY AND THE DIRECTORS
Article 37 of the Regulations defines a conflict of interest as those cases in which there is a conflict,
whether direct or indirect, between the interests of the Company or of the companies of the Group and (i)
the personal interest of the director, (ii) the interest of a person related thereto, and (iii) in the case of a
proprietary director, the interest of the shareholder or shareholders that proposed or made the director’s
appointment or persons directly or indirectly related thereto.
Such regulation contains a list of persons deemed to be related for such purposes, distinguishing
between an individual and a corporate director.
Conflicts of interest shall be governed by the following rules:
a)
Communication: the director must give notice to the Board of Directors, in the person of the chairman
or the secretary of the Board of Directors, of any conflict of interest in which the director is involved.
b)
Abstention: the director shall leave the meeting during the deliberation and voting on those matters in
which the director is affected by a conflict of interest, and shall not be counted in the number of
members attending for purposes of the calculation of a quorum and majorities.
51
c)
Transparency: the Company will report, when appropriate in accordance with legal provisions in
effect from time to time, any cases of conflict of interest in which the directors have been involved
during the financial year in question and of which the Company is aware by reason of notice given
thereto by the director affected by such conflict or by any other means.
However, if the conflict of interest situation is, or may reasonably be expected to be, of a structural and
permanent nature, it shall be deemed that there is a loss of the competence required to hold office. In this
regard, article 16 of the Regulations provides that a loss of competence is an event of resignation,
removal, and withdrawal of the director.
3.
CONFLICTS OF INTEREST BETWEEN THE COMPANY AND THE SENIOR OFFICERS AND
OTHER PERSONS SUBJECT TO CONFLICT OF INTEREST RULES.
The Procedure also governs conflicts of interest with respect to senior officers, and subjects them to the
same rules of reporting, abstention, and transparency applicable to directors.
4.
CONFLICTS OF INTEREST BETWEEN THE COMPANY AND SIGNIFICANT SHAREHOLDERS
Transactions between companies forming part of the Group with significant shareholders or shareholders
that have proposed the appointment of any of the directors and their respective related persons are dealt
with in article 41 of the Regulations of the Board of Directors mentioned in section D.1.
Finally, article 30 of the By-Laws (mentioned in section A.10) also refers to conflicts of interest in which
the shareholders might be involved, as it contemplates that those “participating in a merger or split-off
with the Company, or who are called to subscribe for an increase in capital with the exclusion of preemptive rights or to acquire by overall assignment all of the Company’s assets” may not exercise their
voting rights to adopt such resolutions at the General Shareholders’ Meeting. This voting prohibition shall
cease to have effect when the Company has been the target of a takeover bid and the circumstances
mentioned in section A.10 of this Report are present.
5.
CONFLICTS OF INTEREST WITH OTHER EMPLOYEES
The Code of Ethics, which dedicates a specific section to conflicts of interest, applies to all professionals
within the Group, regardless of rank.
D.7.
Is more than one company of the group listed in Spain?
Yes
No
x
Identify the subsidiaries listed in Spain:
Listed subsidiaries
State whether they have publicly and accurately defined their respective areas of
activity and any possible business relationships among them, as well as those
between the listed dependent company and the other companies within the
group:
Yes
No
Describe the possible business relationships between the parent company and the
listed subsidiary, and between the subsidiary and the other companies within the group
Describe the mechanisms established to resolve possible conflicts of interest
between the listed subsidiary and the other companies within the group:
Mechanisms for the resolution of possible conflicts of interest
52
E. RISK CONTROL AND MANAGEMENT SYSTEMS
Explain the scope of the company’s Risk Management System.
E.1.
The General Risk Control and Management Policy and the Risk Policies that further develop it apply to all
companies over which the Company has effective control, within the limits established by the laws
applicable to the regulated activities carried out by the Group in the various countries in which it operates.
The General Risk Control and Management Policy and the basic principles underpinning it are
implemented by means of a Comprehensive Risk Control and Management System, supported by a Risk
Committee of the Group and based upon a proper definition and allocation of duties and responsibilities at
the operating level and upon supporting procedures, methodologies, and tools, covering the following
stages:
a)
The ongoing identification of significant risks and threats based on their possible impact on key
management objectives and the accounts (including contingent liabilities and other off-balance
sheet risks).
b)
The analysis of such risks, both at each corporate business or function and taking into account
their combined effect on the Group as a whole.
c)
The establishment of a structure of policies, guidelines, and limits, as well as of the
corresponding mechanisms for the approval and implementation thereof, which effectively
contribute to risk management being performed in accordance with the Company’s risk appetite.
d)
The measurement and monitoring of risks, by following consistent procedures and standards that
are common to the Group as a whole
e)
The analysis of risks associated with new investments, as an essential element of decisionmaking based upon profitability/risk.
f)
The maintenance of an internal system for monitoring compliance with policies, guidelines, and
limits, by means of appropriate procedures and systems, including the contingency plans
needed to mitigate the impact of the materialisation of risks.
g)
The periodic monitoring and control of profit-and-loss account risks in order to control the
volatility of the annual income of the Group.
h)
The ongoing evaluation of the suitability and efficiency of applying the system and the best
practices and recommendations in the area of risks for eventual inclusion thereof in the model.
i)
The audit of the system by the Internal Audit Division.
Developed in accordance with the following basic action principles:
a)
Integrate the risk/opportunity vision into the Company’s management, through a definition of the
strategy and the risk appetite and the incorporation of this variable into strategic and operating
decisions.
b)
Segregate functions, at the operating level, between risk-taking areas and areas responsible for
the analysis, control, and monitoring of such risks, ensuring an appropriate level of
independence.
c)
Guarantee the proper use of risk-hedging instruments and the maintenance of records thereof as
required by applicable law.
d)
Inform regulatory agencies and the principal external players, in a transparent fashion, regarding
the risks facing the Group and the operation of the systems developed to monitor such risks,
maintaining suitable channels that favour communication.
53
e)
Ensure appropriate compliance with the corporate governance rules established by the
Company through its Corporate Governance System and the update and continuous
improvement of such system within the framework of the best international practices as to
transparency and good governance, and implement the monitoring and measurement thereof.
f)
Act at all times in compliance with the law and the Company’s Corporate Governance System
and, specifically, with due observance of the values and standards of conduct reflected in the
Code of Ethics and under the principle of zero tolerance towards the commission of unlawful
acts and situations of fraud set forth in the Crime Prevention and Anti-Fraud Policy.
At those companies that are uncontrolled investees to which the Group’s Comprehensive Risk System
does not apply, the Company promotes consistent risk policies and limits and maintains appropriate
channels of information to ensure a proper understanding of risks.
E.2.
Identify the decision-making bodies of the company responsible for preparing
and implementing the Risk Management System.
The Board of Directors of the Company undertakes to develop all of its capabilities in order for the
significant risks to all the activities and businesses of the Group to be adequately identified, measured,
managed, and controlled, and establishes through the General Risk Control and Management Policy the
mechanisms and basic principles for appropriate management of the risk/opportunity ratio, at a risk level
that makes it possible to:
a)
attain the strategic objectives formulated by the Group with controlled volatility;
b)
provide the maximum level of assurance to the shareholders;
c)
protect the results and reputation of the Group;
d)
defend the interests of customers, shareholders, other groups interested in the progress of the
Company, and society in general; and
e)
ensure corporate stability and financial strength in a sustained fashion over time.
1. BOARD OF DIRECTORS
Within its area of authority, and with the support of the Audit and Risk Supervision Committee, it promotes
the implementation of the mechanisms required to ensure the adequate identification, measurement,
management, and control of all significant risks, defines the Company’s strategy and risk profile, and
approves the Group’s Risk Policies.
2. EXECUTIVE COMMITTEE
In order to align the risk impact with the established risk appetite, the Executive Committee of the Board
of Directors, acting at the proposal of the business or corporate divisions involved and upon a prior report
from the Group’s Risk Committee, annually reviews and approves specific guidelines regarding the risk
limits from the Corporate Policies of the Group and of Non-Energy Subsidiaries.
Pursuant to established guidelines, the competent management decision-making bodies of each
company of the Group, within such company’s area of responsibility, approves the specific risk limits
applicable to each of them and implements the control systems required to ensure compliance with the
General Risk Control and Management Policy and with the limits thereunder.
3. AUDIT AND RISK SUPERVISION COMMITTEE
As a consultative body of the Board of Directors, it is charged with the following duties:
a)
Continuously review the internal control and risk management systems, such that the principal
risks are properly identified, managed, and reported.
b)
Ensure that the Group’s risk control and management system identifies at least:
–
The different types of risk (operational, technological, financial, legal, reputational, etc.) the
Company is exposed to, including contingent liabilities and other off-balance sheet risks among
financial or economic risks.
–
The establishment and review of the risk map and levels that the Company deems acceptable.
–
The measures planned in order to mitigate the impact of identified risks in the event that they
54
materialise.
–
The information and internal control systems that will be used to monitor and manage the
aforementioned risks, including contingent liabilities and other off-balance sheet risks.
c)
Maintain appropriate relationships with the Risk Division and with the audit and compliance
committees of the other companies of the Group.
d)
Report in advance on the risks of the Group to be included in the Company’s Annual Corporate
Governance Report and give notice thereof to the Board of Directors, through the Corporate
Social Responsibility Committee, for an assessment of its conclusions.
4. BOARDS OF DIRECTORS OF COUNTRY SUBHOLDING COMPANIES OF THE PRINCIPAL
COUNTRIES IN WHICH THE GROUP OPERATES
They are assigned the power to approve the Risk Policies for the various business of the Group in the
country in question as well as to establish the guidelines on limits and specific risk indicators applicable to
such businesses, based on the nature and unique aspects of each country.
5. RISK COMMITTEE OF THE GROUP
The Risk Committee of the Iberdrola Group is a technical body chaired by the chief financial officer, which
performs executive duties in connection with customary risk management and gives advice to the Group’s
governance bodies.
The Committee meets, at a minimum, one time per month, with the participation of the Group’s director of
Risk Management, those responsible for risks at the corporate businesses and areas that have a Risk
Management function, the Internal Audit Division, and the Administration and Control Division.
The Group’s Credit Risk and Market Risk Committees, which report to the Risk Committee, meet on a
fortnightly and monthly basis, respectively.
E.3.
Point out the principal risks that could affect the achievement of business goals.
The Group is subject to various risks inherent in the different countries, industries, and markets in
which it does business and in the activities it carries out, which may prevent it from achieving its
objectives and successfully implementing its strategies.
The section entitled “Main risk factors associated with the activities of the Iberdrola Group” of the
Management Report within the Annual Report for financial year 2014 provides a detailed description
of the principal risks associated with the activities carried out by the main businesses of the Group,
as well as the risks of the corporation.
Owing to its universal and dynamic nature, the comprehensive risk system allows for the
consideration of new risks that may affect the Group following changes in its operating environment
or revisions of objectives and strategies, as well as adjustments resulting from ongoing monitoring,
verification, review, and supervision activities.
Pursuant to the definitions established by the General Risk Control and Management Policy, at the
Group level, risks are classified as follows:
a)
Corporate Governance Risks: the Company assumes the need to safeguard the interests of the
Company and the strategy of sustained maximisation of the economic value of the Company and
its long-term success, in accordance with the Group’s corporate interest, culture, and corporate
vision, taking into account the legitimate public and private interests that converge in the conduct
of all business activities, particularly those of the various stakeholders and communities and
regions in which the Company and its employees act. A fundamental requirement for the
foregoing is compliance with the Company’s Corporate Governance System, made up of the ByLaws, the Corporate Policies, the internal corporate governance rules, and the other internal
codes and procedures approved by the competent decision-making bodies of the Company and
inspired by the good governance recommendations generally recognised in international
markets.
b)
Market Risks: defined as the exposure of the Group’s results and assets to changes in market
prices and variables, such as exchange rates, interest rates, commodity prices (electricity, gas,
CO2 emission allowances, other fuel, etc.), prices of financial assets, and others.
c)
Credit Risks: defined as the possibility that a counterparty fails to perform its contractual
obligations, thus causing an economic or financial loss to the Group. Counterparties can be end
55
customers, counterparties in financial or energy markets, partners, suppliers, or contractors.
E.4.
d)
Business Risks: defined as the uncertainty regarding the performance of key variables inherent
in the business, such as the characteristics of demand, weather conditions, the strategies of
different players, and others.
e)
Regulatory Risks: defined as those arising from regulatory changes made by the various
regulators, such as changes in compensation of regulated activities or in the required conditions
of supply, environmental regulations, tax laws, and others.
f)
Operational Risks: defined as those related to direct or indirect economic losses resulting from
inadequate internal procedures, technical failures, human error, or as a consequence of certain
external events, including the economic, social, environmental, and reputational impact thereof,
as well as legal risks and the risk of fraud.
g)
Reputational Risks: potential negative impact on the value of the Company resulting from
conduct on the part of the Company that is below the expectations created among various
stakeholders: shareholders, customers, media, analysts, Government, employees, and society in
general.
Identify whether the entity has a risk tolerance level.
The Company’s Board of Directors annually reviews and approves the acceptable risk tolerance level for
the Group.
The General Risk Control and Management Policy, together with the specific Risk Policies and limits that
develop it, qualitatively and quantitatively establish, in sufficiently detailed form, the risk appetite that is
annually accepted at the Group level and at the level of each of its main businesses.
By way of complement, once such limits and guidelines are considered in order to verify the risk assumed
globally in the annual profit and loss account, there is a comprehensive probability analysis of the
remaining global risk for the year at the time of approving the annual budget, which analysis is updated
for each of the three quarterly reviews thereof.
In addition, all new multi-year plans are accompanied by their associated risk analysis.
Corporate risk policies and limits reviewed and approved annually:
–
Corporate Credit Risk Policy
–
Corporate Market Risk Policy
–
Operational Risk in Market Transactions Policy
–
Insurance Policy
–
Investment Policy
–
Financing and Financial Risk Policy
–
Treasury Share Policy
–
Risk Policy for Equity Interests in Listed Companies
–
Reputational Risk Framework Policy
–
Procurement Policy
Risk policies of the various businesses of the Group reviewed and approved annually:
–
Risk Policy for the Liberalised Businesses of the Iberdrola Group
–
Risk Policy for the Renewables Energy Businesses of the Iberdrola Group
–
Risk Policy for the Networks Businesses of the Iberdrola Group
–
Risk Policy for the Non-Energy Businesses of Grupo Iberdrola
In general terms, the Corporate Policies, applicable to all of the Group’s businesses, establish the
framework and the proper practices for the control, management, and mitigation of the various types of
risks and establish overall risk limits to be distributed among the various businesses, measured in the
56
form of physical, notional, and/or probability figures (VaR, CVaR, etc.), through measures such as:
–
Limits to maximum global credit risk exposure by type of counterparty
–
Limits to market risk proportional to the volume of activity of each business
–
Strict global limit on discretionary energy trading
–
Limits on operational risk through preventive maintenance programmes and insurance
programmes
–
Strict limits on activities not associated with the main energy business
–
Other
The Risk Policies of each of the main businesses of the Group establish the framework and the
authorised activities for each of them, together with the qualitative and quantitative risk guidelines, limits,
and indicators that should be applicable thereto, adjusted to the specific nature of each of them.
The General Risk Control and Management Policy, as well as a summary of the Corporate Risk Policies
and another summary of the Specific Risk Policies for the Various Businesses of the Group, are available
on the corporate website (www.iberdrola.com).
E.5.
State what risks have materialised during the financial year.
During 2014, the activities of the Iberdrola Group were subject to various risk factors in the countries and
markets in which it does business and which, from a global standpoint, did not have a significant impact
on the income for the financial year, thanks to the diversification of activities, markets, and geographical
areas of the Group, which made it possible for the negative effects of some businesses to be offset by a
favourable performance in others.
Risks that have materialised include:

Publication of a Ministerial Order in Spain establishing the standard values applicable to production
plants under the old special regime, which:

Increases the exposure to market risk of our wind production in Spain (4.7 TWh/year) while assigning
a reasonable return to the rest (7.3 TWh/year).

Puts at risk the viability of all of our slurry treatment and some cogeneration plants, with a total
provision of 20 million euros after taxes at the consolidated level.

The provision for our interest in the Elcogas plant, in Spain, with a total impact of approximately 11
million euros after taxes at the consolidated level.

Weakness in demand for electricity in Spain and the United Kingdom.

Continuing low prices for electricity and gas in the United States.

Write-down of assets and development costs at renewable energy projects in the United States,
United Kingdom, and rest of world, in the total after-tax amount of 53 million euros.

Decision by the FERC (U.S. federal regulator) reducing the future remuneration of our transmission
assets in the State of Maine, with an estimated annual impact on EBITDA for Central Maine Power of
approximately USD 14 million beginning next year.

Continuing drought in Brazil, without a significant final impact during the financial year, after the
measures adopted by the Brazilian government.

Write-down of the value of interests of the company in the companies Vinzeo and Amara, in the
respective after-tax amounts of 22 and 17 million euros.
Positive developments include:

An improvement in the perception of Spain risk, which, together with a battery of monetary policy
measures adopted by the ECB and improvements in the sovereign rating of our country, has allowed
for a new relaxation of the risk premium to levels of around 100 bp and financial issuances on
favourable terms.

The good hydrological year in Spain, with hydroelectric production of approximately 5 TWh above
average.

A satisfactory rate review for our electricity distributor in the USA, Central Maine Power, for the
57
period September 2014 to September 2015.

Satisfactory annual rate readjustments for our electricity distributors in Brazil, Elektro and our
investee companies Coelba, Cosern, and Celpe, which satisfactorily recognise the increases in costs
that they have experienced.

A strengthening of the listing price for Gamesa above the current book value, which has allowed for a
reversion of provisions in the amount of 58 million euros after taxes for the first half of 2014.
In the opinion of the Company, some risk factors, such as those relating to:

The low international prices for petroleum and other commodities

Possible new international financial turbulence

Low prices for gas and electricity in the U.S.

Low growth in the demand for electricity in Spain and the United Kingdom

Strong media, regulatory, and political pressure in the United Kingdom against the electricity sector,
and

Possible prolongation of the drought in Brazil,
may continue to be seen during 2015, once again affecting its activities.
Describe the plans for responding to and supervising the entity’s main risks.
E.6.
The Comprehensive Risk System, together with the Company’s control and management policies and
systems that develop it, including the Group’s Risk Committee and Operating Committee, have allowed
for the identification of new risks and threats sufficiently in advance, and to establish appropriate
mitigation plans.
The Group’s Operating Committee meets on an approximately weekly basis.
The Group’s Risk Committee meets on a monthly basis, reviews the various risks, and on a quarterly
basis approves a Quarterly Risk Report of the Group, which includes the main risk positions, a report on
compliance with policies and limits, and an update of the key risk maps.
The Audit and Risk Supervision Committee of the Board of Directors periodically monitors the evolution of
the Company’s risks at least on a quarterly basis:
-
It reviews the Quarterly Risk Reports of the Group, which include monitoring compliance with risk
limits and indicators and updated key risk maps, submitted by the Group’s director of Corporate
Risks.
-
It coordinates and reviews Risk Reports sent periodically (at least semi-annually) by the audit
and compliance committees of the country subholding companies and business subholding
companies of the Group.
-
It prepares a Risk Report for the Board of Directors at least semi-annually.
58
F. INTERNAL RISK CONTROL AND MANAGEMENT SYSTEMS IN CONNECTION WITH
THE PROCESS OF ISSUING FINANCIAL INFORMATION (ICFRS)
Describe the mechanisms making up the risk control and management systems with
respect to the process of issuing the entity’s financial information (ICFRS)
F.1
Control environment at the entity
Indicate at least the following, specifying the main features thereof:
F.1.1. What bodies and/or functions are responsible for: (i) the existence and
maintenance of an adequate and effective internal control over financial
reporting system (ICFRS); (ii) the implementation thereof; and (iii)
oversight thereof.
Based on article 34.5.C.b of the Company’s By-Laws, the ultimate responsibility for the existence of an
adequate and effective internal control over financial reporting system (ICFRS) lies with the Board of
Directors of Iberdrola.
The persons in charge of the country subholding companies and the business subholding companies,
together with the respective control officers, as well as the directors of the global corporate areas, are
responsible for the design and implementation of the ICFRS. Such responsibility is expressly set forth in
the certifications signed by such persons on a semi-annual basis in connection with the financial
information for their respective areas of responsibility.
Pursuant to paragraphs b) and d) of article 44.4 of the By-Laws, as well as article 25.7.d of the
Regulations of the Board of Directors, the Audit and Risk Supervision Committee is responsible for
oversight of the ICFRS. The Committee draws on the support of the Internal Audit Division to discharge
such responsibility.
F.1.2. Whether any of the following are in place, particularly as regards the
financial information preparation process:

Departments and/or mechanisms in charge of: (i) the design and revision
of the organisational structure; (ii) clearly defining the lines of
responsibility and authority, with an appropriate distribution of work and
duties; and (iii) ensuring that there are sufficient procedures for the
proper dissemination thereof at the entity.
The Board of Directors of Iberdrola defines the top-level organisational structure. The heads of such toplevel organisations, together with the Human Resources Division, are responsible for deployment within
their respective areas.
Each top-level division prepares a proposed organisation structure, including a description of the mission,
duties, and responsibilities of the various organisations deployed, which must then be validated by the
Human Resources Division and the Finance and Resources Division.
Primary responsibility for the preparation of financial information lies with the corporate Administration and
Control Division. Such division establishes the structure of those responsible for Control at the country
subholding companies and business subholding companies and is in charge of coordinating and
supervising their activities.

Code of conduct, body that approves it, degree of dissemination and
instruction, principles and values included (indicating whether the
recording of transactions and the preparation of financial information are
59
specifically mentioned), body in charge of reviewing breaches and of
proposing corrective actions and penalties.
The Iberdrola Group has a Code of Ethics, approved by the Board of Directors.
According to article 2.1 thereof, “the principles and guidelines for conduct contained in the Code of Ethics
apply to all of the Group’s professionals, regardless of seniority, geographic or functional location, or the
company of the Group for which they provide their services”. The Code of Ethics is communicated to and
disseminated among the professionals of the Iberdrola Group in accordance with the plan approved for
such purpose by the Compliance Unit.
Article 32.2 of the Code of Ethics expressly provides as follows:
“The Group shall provide true, proper, useful, and consistent information regarding its programmes and
actions. Transparency of information is a basic principle that must govern the actions of Group
professionals.
The economic/financial information of the Group (especially the annual accounts) shall faithfully reflect its
economic and financial position and its net worth, in accordance with generally accepted accounting
principles and applicable international financial reporting standards. For such purposes, no professional
shall conceal or distort the information set forth in the accounting records and reports of the Group, which
shall be complete, accurate, and truthful.
A lack of honesty in the communication of information, whether internally within the Group (to employees,
subsidiaries, departments, internal bodies, management decision-making bodies, etc.) or outside the
Group (to auditors, shareholders and investors, regulatory entities, the media, etc.), is a breach of this
Code of Ethics. This includes delivering incorrect information, organising it in an incorrect manner, or
seeking to confuse those who receive it”.
Control of the application of the Code of Ethics is a duty of the Compliance Unit, a body linked to the
Corporate Social Responsibility Committee of the Company’s Board of Directors, with duties in the area of
regulatory compliance and the Company’s Corporate Governance System. This Unit evaluates and
prepares an annual report on the level of compliance with the Code of Ethics. The report is transmitted to
the Finance and Resources Division, to the Company’s Internal Audit Division, and to the Corporate
Social Responsibility Committee. In turn, the latter transmits it to the competent governance bodies, to the
Company’s chairman & chief executive officer, and to the Audit and Risk Supervision Committee.
The Compliance Unit also has the duty to determine whether a Group professional has conducted
activities in violation of the law or of the Code of Ethics and, if applicable, to direct the Finance and
Resources Division, or the Division responsible for the human resources function at the relevant Group
company, to apply disciplinary measures in accordance with the rules on breach of duties and penalties
contained in the collective bargaining agreement to which the professional belongs or in applicable labour
law provisions.
Pursuant to article 41.1 of the Code of Ethics, the professionals of the Group expressly accept the vision,
values, and rules of conduct established therein.
In addition, pursuant to article 41.2, professionals who join or become part of the Group in the future shall
expressly accept the vision, values, and rules of conduct set forth in the Code of Ethics, which document
shall be attached to their respective employment contracts.

Reporting channel that makes it possible to report any irregularities of a
financial or accounting nature to the audit committee, as well as any
possible breach of the code of conduct and irregular activities at the
organisation, specifying, if appropriate, whether it is confidential.
Iberdrola has a procedure in place that must be followed by all employees of the Group who wish to
report potentially significant irregularities of a financial and accounting nature and that allows them to
report such irregularities, by e-mail or regular mail, to the chair of the Audit and Risk Supervision
Committee.
As established in the procedure itself, the Company’s Board of Directors guarantees that the name of the
reporting person and the irregularity reported shall be treated in the strictest confidence, both in the
reporting process and in any process for the assessment and clarification of the facts conducted by the
Audit and Risk Supervision Committee and the organisations of the Company or third parties participating
at the request of such Committee.
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In accordance with the above-mentioned procedure, the chair of the Audit and Risk Supervision
Committee receives and admits the report for further processing. Such admission is made on the basis of
the requirements established in the procedure (name of the sender, sufficiently detailed information on
the situation reported, need for the report to fall within the scope of the channel, confidentiality guarantee,
personal data protection, etc.).
No reports were received during financial year 2014.

Regular training and update programmes for personnel involved in the
preparation and review of financial information, as well as in the
evaluation of the internal control over financial reporting system, covering
at least accounting standards, auditing, internal control, and risk
management.
Personnel involved in the preparation and review of financial information, as well as in the evaluation of
the internal control over financial reporting system, receives regular training on accounting standards,
auditing, internal control, and risk management, according to its specific responsibilities.
In accordance with the organisational structure of the Iberdrola Group, the divisions that have a direct
relationship with these types of duties are the Internal Audit Division, the Administration and Control
Division, and the Finance and Resources Division.
During financial year 2014, the personnel involved in these duties in Spain received 9,711 hours of
training, of which 5,203 hours were dedicated to technical training directly related to the responsibilities
discharged by such personnel, which accounts for 53.25% of the training received.
A total of 108 technical courses were organised, most of them taught by external entities (business
schools, universities, or specialist consulting firms).
Especially noteworthy is the receipt of the following certificates by Iberdrola professionals in these
functional areas:
‫ـ‬
Certified Fraud Examiner (CFE), 3 professionals.
‫ـ‬
Certified Internal Auditor (CIA), 3 professionals
‫ـ‬
Certified in Risk Management Assurance (CRMA), 1 professional
A total of 298 professionals participated in these training activities for personnel involved in the
preparation and review of financial information and in the evaluation of the ICFRS.
Apart from the Certified Fraud Examiner (CFE), Certified Internal Auditor (CIA), and Certified in Risk
Management Assurance (CRMA) trainings mentioned above, the technical training activities in which
these professionals engaged include the following:
‫ـ‬
Tax Updates
‫ـ‬
Financial Analysis: Profitability, Risk, and Principles of Valuation
‫ـ‬
Consolidation of Balance Sheets
‫ـ‬
Consolidation of Financial Statements
‫ـ‬
Corporate Credit Rating
‫ـ‬
Corporate Governance for Fraud Prevention
‫ـ‬
II Bilbao Tax Forum 2013-2014
‫ـ‬
III Energy and Competitiveness Course
‫ـ‬
Internal Fraud and Auditory
‫ـ‬
Tax Reform Seminar 2015
‫ـ‬
XIX INTERNAL AUDIT CONFERENCE
‫ـ‬
XXI MEETING ON CONSOLIDATED TAXATION
61
F.2
Risk assessment of financial information
Indicate at least the following:
F.2.1. What are the main features of the risk identification process, including the
process of identifying the risks of error or fraud, with respect to:

Whether the process exists and is documented.
The process for the identification of risks of error in financial information is one of the most important
steps in the method for the development of internal control of the financial information of Iberdrola, and
the goals, implementation, and results thereof are documented.
The method starts with a review of financial information at the various business subholding companies
and corporate areas, in order to select the most significant accounts and notes to the accounts, in
accordance with both quantitative (materiality) and qualitative (business risk and visibility to third parties)
standards. The selected accounts and notes are grouped into management cycles or large processes in
which the selected information is generated. The cycles are analysed and a description of each is
prepared, as a way of identifying possible risks of error in the financial information, in connection with
attributes such as completeness, presentation, assessment, cut-off, recording, and validity. The identified
risks are submitted to a process of prioritisation, such that the most significant ones are selected by
applying professional judgement on a number of indicators (existence of documented processes and
controls, existence of systems that automate the processes, whether there have been any incidents in the
past, whether the process is known and mature, or whether judgements need to be made to make
estimates). The risks of fraud are not explicitly identified, although they are taken into account to the
extent that they might generate material errors in financial information.
Once the most significant risks have been selected, the controls needed to mitigate or manage them are
selected and designed; such controls are monitored, documented, and systematically reviewed by
internal audit.
The risks selected are reviewed at least on an annual basis, within the framework of the assessment of
the effectiveness of internal control carried out by the persons or divisions responsible therefor. The
purpose of such review is to adjust the risks to the changing circumstances in which the Company
operates, particularly in the event of changes in the organisation, information technology systems,
regulations, products, or the situation of the markets.

Whether the process covers all the objectives of financial information
(existence and occurrence; completeness; assessment; presentation,
breakdown and comparability, and rights and obligations), whether it is
updated, and how often.
As mentioned above, the cycles or large processes in which financial information is generated are
reviewed at least on an annual basis in order to identify possible risks of error, in connection with
attributes such as validity (existence and authorisation), completeness, assessment, presentation, cut-off,
and recording.

The existence of a process for the identification of the scope of
consolidation, taking into account, among other matters, the possible
existence of complex corporate structures, holding entities, or special
purpose entities.
The scope of consolidation is identified on a monthly basis, and the result thereof is the updated
corporate map, which expressly identifies the changes that occurred in each period.
This review covers all companies in which Iberdrola or any of its subsidiaries has an interest, no matter
how small.
Furthermore, recommendation 8 of the Unified Good Governance Code provides that the Board of
Directors must reserve, among other matters, the power to approve the creation or acquisition of equity
62
interests in special purpose entities or entities registered in countries or territories regarded as tax havens
(SPEs), as well as any other transactions or operations of a similar nature that, due to their complexity,
might diminish the transparency of the Group. Recommendation 47 of such Code provides that the Audit
Committee must report to the Board of Directors prior to such decisions being adopted.
These recommendations have been included in the Regulations of the Board of Directors and in the
Regulations of the Audit and Risk Supervision Committee of Iberdrola.
Accordingly, whenever the Company intends to create a special purpose entity or an entity registered in a
tax haven, or to acquire an interest in one, the transaction must first be submitted to the Audit and Risk
Supervision Committee for it to issue a report and then to the Board of Directors for approval.
There is a specific procedure for such purpose, tailored to the current corporate governance model,
according to which such initiative is to be taken by the Division or business subholding company that
intends to create or acquire a special purpose company or a company registered in a tax haven. In the
case of business subholding companies that have a board of directors and an audit committee, their
corporate governance bodies must first review the proposed transaction.

Whether the process takes into account the effects of other types of risks
(operational, technological, financial, legal, reputational, environmental,
etc.) to the extent that they affect the financial statements.
The process for the identification of risks of error in financial information takes into account the effects of
other types of risks (operational, technological, legal, reputational, environmental, etc.) to the extent that
they affect the accounts; such risks are assessed and managed by different corporate units such as the
Risk Division or Legal Services, among others. However, no express identification of such other types of
risks is carried out to identify financial information risks.

What governance body of the entity supervises the process.
The governance body that supervises the process is the Audit and Risk Supervision Committee, which
draws on the support of the Internal Audit Division to discharge this responsibility.
F.3
Control activities
Indicate whether at least the following are in place and describe their main
features:
F.3.1. Procedures for review and authorisation of financial information, and
description of the internal control over financial reporting system to be
published in the securities market, indicating the persons or divisions
responsible therefor, as well as documentation describing the flows of
activities and controls (including those relating to risk of fraud) of the
various types of transactions that could materially affect the financial
statements, including the closing process and the specific review of
significant judgements, estimates, assessments, and projections.
The process or structure of certification of financial information, conducted formally on a semi-annual
basis, on the dates of the year-end and interim closing processes, reflects the manner in which financial
information is generated in the Group.
In such structure, the persons in charge of the country subholding companies and those responsible for
the business subholding companies, together with the respective directors of control, as well as the heads
of the global corporate areas, certify both the reliability of the financial information in the areas under their
responsibility (which is the information they provide for purposes of consolidation at the group level) and
the effectiveness of the internal control system established to reasonably ensure such reliability. Finally,
the chairman & chief executive officer, as the highest executive authority, and the director of
63
Administration and Control, as the person responsible for the preparation of financial information, certify
the reliability of the consolidated accounts to the Board of Directors.
The Audit and Risk Supervision Committee, with the support of the Internal Audit Division, supervises the
entire certification process, and submits the conclusions of such review to the Board of Directors at the
meetings at which the accounts are formally approved.
As regards the description of the internal control over financial reporting system to be published in the
securities markets, the review and authorisation procedure is the same as that used for all contents of an
economic and financial nature of the Annual Corporate Governance Report.
The documentation of the internal control over financial reporting system includes high-level descriptions
of the cycles of generation of selected significant financial information, as well as detailed descriptions of
the prioritised risks of error and of the controls designed to mitigate or manage them. The description of
the controls includes the evidence to be obtained in the implementation thereof, which is necessary for its
review.
Each of the closing processes performed at the business units is regarded as a cycle, and the same is
true of all the closing activities performed at the corporate level, of the global consolidation process, and
of the process for preparation of the notes to the accounts. As a result, all such activities are subject to
the methodological process described in the section relating to risks.
The specific review of critical accounting judgements and significant estimates, assessments, and
projections is subject to specific controls within the model, since this type of matter entails the
identification of risks of error in the different cycles in which they are made. In many cases, the evidence
of such specific controls is the media supporting such reviews.
Independently of the certification process followed in the countries, businesses, and corporate areas, the
Audit and Risk Supervision Committee, again with the support of the Internal Audit Division, performs an
overall review of financial information on a quarterly basis, ensuring that the semi-annual financial reports
and the quarterly management statements are prepared using the same accounting standards as the
annual financial reports, verifying the proper delimitation of the scope of consolidation as well as the
proper application of generally accepted accounting principles and international financial reporting
standards.
F.3.2. Policies and procedures of internal control over reporting systems
(including, among others, security of access, control of changes,
operation thereof, operational continuity, and segregation of duties) that
provide support for the significant processes of the entity in connection
with the preparation and publication of financial information.
The controls used to mitigate or manage the risks of error in financial information include controls relating
to the most significant computer applications, such as controls of user access permissions or of the
integrity of the transfer of information between applications.
In addition, the Iberdrola Group has guidelines or regulations as well as procedures for internal control
over reporting systems in connection with software acquisition and development, the acquisition of
system infrastructure, software installation and testing, change management, service level management,
management of the services provided by third parties, system security and access thereto, management
of incidents, operation management, continuity of operations, and segregation of duties.
Such guidelines and procedures (which, in some cases, differ according to geographical area or type of
solution and are in the process of progressive standardisation) are applied across all information systems
supporting significant financial information generation processes, and on the infrastructure required for
the operation thereof.
The Systems director of Iberdrola certifies the effectiveness of the internal controls established on
information systems on an annual basis.
F.3.3. Internal control policies and procedures designed to supervise the
management of activities outsourced to third parties, as well as those
aspects of assessment, calculation, or valuation entrusted to independent
experts, which may materially affect the accounts.
Generally speaking, the Iberdrola Group has no significant duties outsourced to third parties that have a
64
direct impact on financial information. The assessments, calculations, or valuations entrusted to third
parties that may materially affect the accounts are regarded as significant financial information generating
activities that lead, if appropriate, to the identification of high-priority risks of error, which, in turn, entails
the design of associated internal controls. Such controls cover the review and internal approval of the
basic assumptions to be used, as well as the review of the assessments, calculations, or valuations made
by outside parties, by verifying them against calculations made internally.
F.4
Information and communication
Indicate whether at least the following are in place and describe their main
features:
F.4.1. A specific function charged with defining and updating accounting
policies (accounting policy area or department) and with resolving
questions or conflicts arising from the interpretation thereof, maintaining
fluid communications with those responsible for operations at the
organisation, as well as an updated accounting policy manual that has
been communicated to the units through which the entity operates.
The Accounting Regulations Division, reporting directly to the director of Administration and Control, is
responsible for defining and updating accounting policies, as well as for resolving questions or conflicts
stemming from the interpretation thereof. It maintains fluid communications with those responsible for the
operation of the organisation and, especially, with those responsible for accounting functions. It publishes
a quarterly newsletter, widely disseminated within the Group, on new accounting developments in
connection with IFRS, which includes regulation updates (laws and regulations that come into force,
drafts issued, laws and regulations enacted, laws approved and pending approval by the European
Union, and expected future laws and regulations) as well as accounting questions asked internally,
together with the conclusions in respect thereof.
The Accounting Regulations Division is also responsible for continuously updating the Group’s accounting
practices manual and for the appropriate dissemination thereof.
The accounting manual is updated continuously. For this purpose, the Accounting Regulations Division
analyses whether new developments or changes in accounting matters have an effect on the Group’s
accounting policies, as well as the effective date of each of such laws or regulations. When a new law or
regulation, or interpretation thereof, is identified as having an effect on the Group’s accounting policies, it
is included in the manual and is also communicated to those responsible for preparing the Group’s
financial information by means of the quarterly newsletters mentioned above, and there is an update of
the application in which the manual is maintained.
The updated version of the manual is available in an application on the Group’s internal network. This
application is also accessible by VPN over the internet and can be linked to e-mail. Any change or the
inclusion of a document within the manual generates a notice by e-mail to all users.
F.4.2. Mechanisms to capture and prepare financial information with
standardised formats, to be applied and used by all units of the entity or
the group, supporting the principal accounts and the notes thereto, as
well as the information provided on the internal control over financial
reporting system.
The mechanism to capture and prepare the information supporting the principal accounts of the Iberdrola
Group is based primarily on the use of a unified management consolidation tool (known as BPC)
accessible from all geographical areas, currently deployed across the entire Group.
A large portion of the information supporting the breakdowns in and notes to the financial information is
included in the consolidation tool, and the rest is captured on standardised spreadsheets known as
reporting packages, which are prepared for the semi-annual and year-end closing processes.
65
F.5
Supervision of the operation of the system
Indicate and describe the main features of at least the following:
F.5.1. The activities of supervision of the internal control over financial reporting
system performed by the audit committee, as well as whether the entity
has an internal audit function whose duties include providing support to
the committee in its work of supervising the internal control system,
including the internal control over financial reporting system. Information
is also to be provided concerning the scope of the assessment of the
internal control over financial reporting system performed during the
financial year and on the procedure whereby the person or division
charged with performing the assessment reports the results thereof,
whether the entity has an action plan in place describing possible
corrective measures, and whether the impact thereof on financial
information has been considered.
The activities of supervision of the internal control over financial reporting system carried out by the Audit
and Risk Supervision Committee include basically: (i) monitoring compliance with the certification process
by the various persons or divisions responsible for financial information, (ii) reviewing the design and
operation of the internal control system, with the support of the Internal Audit Division, to assess the
effectiveness thereof, and (iii) periodic meetings with external auditors, internal auditors, and senior
management to review, analyse, and discuss financial information, the group companies covered, and the
accounting standards applied, as well as, where appropriate, the significant internal control weaknesses
detected.
It should be noted that on an annual basis, those responsible for the preparation of the financial
information of each country subholding company, each business subholding company, and each
corporate area carry out a review of the design and operation of the internal control system within their
area of responsibility in order to assess the effectiveness thereof, in a process coordinated by the Internal
Control Division.
To that end, an analysis is made of whether, as a result of the changing circumstances in which the
Group operates (changes in organisation, systems, processes, products, regulation, etc.), changes in
identified risks need to be included and prioritised. A review is also made of whether the design of the
controls to mitigate or manage the risks that may have changed is appropriate, as well as whether the
controls have functioned properly, in accordance with their design.
The conclusions of this annual review, both as regards the deficiencies detected (which are classified as
serious, medium, or slight, according precisely to their possible impact on financial information) and with
respect to the action plans to correct them, are submitted at an annual seminar session chaired by the
director of Administration and Control, at which the Internal Audit Division is also in attendance. At such
meeting, conclusions are reached concerning the effectiveness of the internal control system at each of
the different areas for which they are responsible and, overall, at the Group as a whole.
The most significant conclusions of the review performed are subsequently submitted to the Audit and
Risk Supervision Committee within the framework of the periodic meetings with the director of
Administration and Control.
Independently of the foregoing, the Internal Audit Division (which reports to the chairman & chief
executive officer and is functionally controlled by the Audit and Risk Supervision Committee, and which,
as provided in the Basic Internal Audit Regulations of Iberdrola and the Companies of its Group, has the
primary role of facilitating the review, assessment, and effective supervision of the internal control and
significant risk management systems of the Company and its Group), conducts an independent review of
the design and operation of the internal control system in support of the Audit and Risk Supervision
Committee, identifies deficiencies, and draws up recommendations for improvement.
As a result thereof, the Internal Audit Division continuously monitors the various action plans agreed with
the different organisations to correct the deficiencies detected and to implement the suggestions for
improvement agreed with the organisations.
The period that the Internal Audit Division plans for an in-depth review of the entire internal control system
is three years.
66
Specifically, during financial year 2014, various cycles of the companies Iberdrola Iberdrola Ingeniería y
Construcción S.A., Iberdrola Inmobiliaria S.A, Iberdrola Distribución Eléctrica, S.A, Scottish Power, Ltd.,
Iberdrola Renovables Energía, S.A., Iberdrola Renewables Holding, Inc., Iberdrola USA Networks, Inc.,
Iberdrola Energía, S.A. and Elektro Electricidade e Serviços, S.A., were reviewed, as were the corporate
areas of Administration and Control, Finance and Treasury, and Legal Services.
In addition, the Internal Audit Division performs a review of the operation of the internal controls regarded
as most critical on a semi-annual basis, on the dates of the semi-annual and year-end closing.
The combination of the quarterly reviews and the semi-annual reviews of the most critical controls
enables the Internal Audit Division to perform an assessment of the internal control system, as regards
the design and operation thereof, and to issue an opinion on the effectiveness of the internal controls
established to ensure the reliability of financial information, which it submits to the Audit and Risk
Supervision Committee within the framework of their periodic meetings.
F.5.2. Whether it has a discussion procedure whereby the auditor (as provided
in the Technical Auditing Standards), the internal audit function, and other
experts can inform senior management and the audit committee or the
directors of the entity of the significant internal control weaknesses
detected during the review of the annual accounts or such other reviews
as may have been entrusted to them. Information shall also be provided
on whether it has an action plan to seek to correct or mitigate the
weaknesses found.
Generally speaking, the procedure for discussion of significant internal control weaknesses detected is
based on periodic meetings of the various agents.
Thus, the Audit and Risk Supervision Committee holds meetings, both at the semi-annual and at the yearend closing, with the external auditors, the internal auditors, and the division responsible for preparing
financial information, in order to discuss any significant aspect of the preparation process and of the
resulting financial information.
Specifically, pursuant to the provisions of its Regulations (scope of authority), the Audit and Risk
Supervision Committee of Iberdrola has, among other duties, the duty of reviewing, together with the
auditors, the significant weaknesses of the internal control system detected in the course of the audit. To
such end, the auditor appears before such Committee on an annual basis to submit recommendations in
connection with the internal control weaknesses identified during the review of the accounts. Any
weaknesses described by the auditor are monitored on an ongoing basis by the Committee, with the
support of the Internal Audit Division. The auditors did not highlight any significant internal control
weaknesses during financial year 2014.
Furthermore, the division responsible for preparing the consolidated accounts also holds meetings with
the external auditors and with the internal auditors, both at the semi-annual and at the year-end closing,
to discuss significant issues relating to financial information.
F.6
Other significant information.
Iberdrola has an internal model or system for control over financial reporting, the purpose of which is to
reasonably ensure the reliability of the financial information. It is important to note that the development of
this model, which commenced in 2006, was not the product of a legal requirement, but rather derived
from the firm belief of both the Board of Directors and the senior management of the Company that in a
context of growth and internationalisation as the one that could already be envisaged for the Group, an
explicit and auditable internal control system would contribute to maintaining and improving its control
environment and the quality of financial information; it would also boost investors’ trust because of its
effects on the transparency, reputation, and good governance of Iberdrola and of the subsidiaries making
up the Iberdrola Group.
The Internal Control over Financial Reporting Model or System (ICFRS) of the Iberdrola Group rests on
two main pillars: certification and internal control proper.
Certification is a semi-annual process in which those responsible for financial information in the different
areas of the Company certify that: (i) the financial information they deliver to Iberdrola for purposes of
consolidation does not contain any material errors or omissions and provides a fair view of the results and
67
the financial condition within their area of responsibility, and (ii) they are responsible for establishing the
ICFRS within their area of responsibility and have found, upon evaluation, that the system is effective.
This content of the certifications is inspired by the certification model established in section 302 of the US
Sarbanes-Oxley Act.
The culmination of the semi-annual process is a joint certification that the chairman & chief executive
officer and the director of Administration and Control submit to the Board of Directors.
The other pillar supporting this model, i.e. internal control proper, is patterned on the reference framework
described in the report entitled “Internal Control Integrated Framework” of the Committee of Sponsoring
Organisations of the Treadway Commission (COSO), and is primarily aimed at providing a reasonable
level of security in achieving the aim of reliability of the financial information.
The methodology used by Iberdrola for the development and continuous update of internal control
consists of the following stages or steps: (i) analysis and selection of significant financial information, (ii)
grouping such information into cycles or large processes in which it is generated, (iii) identification,
assessment, and prioritisation of risks of error in financial information within selected cycles, (iv) design
and operation of controls in order to mitigate or manage selected risks, and (v) monitoring and update of
the previous steps in order to continuously adapt the model to the circumstances of corporate activities.
One of the salient features of the design of this model is that it seeks to guarantee the quality of financial
information during all months of the year, such that it is not limited only to the periods of year-end or semiannual closings.
This feature is strengthened through the use of a specific software application developed in-house by the
Group that allows for monitoring of the status of controls at all times.
Another important feature of the model is that it extends the culture of internal control to all of the
organisations, both corporate and business, that significantly contribute to generating financial
information, by assigning personal responsibility for the implementation and documentation of controls.
All relevant documents in connection with Iberdrola’s ICFRS, both regarding the certification process and
internal control proper, are contained in the aforementioned computer application.
Those responsible for implementing the controls enter into the computer application evidence of such
controls having been performed, and then evaluate the results obtained, which they rate as satisfactory or
non-satisfactory. This allows for the internal control situation to be monitored in real time, and also makes
it possible to act promptly on any deficiencies detected.
In addition, those responsible for control at the country subholding and business subholding companies,
as well as those responsible for the corporate areas, carry out an annual review of the design and
operation of the ICFRS, as a systematic process for updating such model in order to adapt it to the
changing circumstances of corporate activities.
The annual review is coordinated by the Internal Control Division, which is also responsible for managing
the computer application and coordinating the development of the ICFRS in the various business units
and corporate areas of the Group.
Moreover, the Internal Audit Division, which is responsible for supervising internal control as part of its
duty of support of the Audit and Risk Supervision Committee, performs an independent review of the
design and operation of the ICFRS, identifying deficiencies and formulating recommendations for
improvement. Such review is carried out in accordance with an established policy of rotation among the
different cycles within the model over a period of three years.
The Internal Audit Division also performs a semi-annual independent review of the effectiveness of the
internal controls established to guarantee the reliability of financial information. It also reviews the process
for certification of financial information on a semi-annual basis. The conclusions of such reviews are
submitted to the Audit and Risk Supervision Committee, which, if appropriate, adopts such conclusions
and submits them in turn to the Board of Directors.
The current scope of the ICFRS is such that, based on materiality standards, it covers the entire Iberdrola
Group. At present, more than 900 persons within the Group use the software application, both to
document evidence of the performance of more than 2,100 controls (which mitigate or manage more than
900 risks of error in financial information that have been prioritised) and to monitor, analyse, adjust, and
assess the ICFRS.
Furthermore, approximately 60 officers who participate in the process of certification of the accuracy of
information under their responsibility do so by using an electronic signature directly on the computer
application.
As a consequence of all of the foregoing, the final result of the certification process, which is based on the
situation of internal control proper, can be reviewed by the Board of Directors of Iberdrola as one of the
significant guarantees of reliability in connection with the preparation of the Group’s annual and interim
68
financial information.
F.7
External audit report
Report on:
F.7.1. Whether the information on the internal control over financial reporting
system has been reviewed by the external auditor, in which case the entity
should include the respective report as an exhibit. Otherwise, it should
provide the reasons therefor.
The information on the internal control over financial reporting system sent to the markets has not been
reviewed by the external editor for reasons of consistency with the fact that the rest of the information set
forth in the Annual Corporate Governance Report is only reviewed by the auditor in connection with the
accounting information contained in such report. It is also believed that having the information on the
internal control over financial reporting system reviewed externally would in a certain manner overlap the
internal control review to be performed by the external auditor, according to technical auditing standards,
within the context of the audit of the accounts.
69
G. DEGREE TO WHICH CORPORATE GOVERNANCE RECOMMENDATIONS ARE
FOLLOWED
State the company’s degree of conformance to the recommendations of the Unified Good
Governance Code.
If the company does not comply with any recommendation or follows it partially, there
must be a detailed explanation of the reasons providing shareholders, investors, and the
market in general with sufficient information to assess the company’s course of action.
Generalised explanations will not be acceptable.
1. The By-Laws of listed companies do not limit the maximum number of votes that can
be cast by a single shareholder, or impose other obstacles to the takeover of the
company by means of the acquisition of its shares on the market
See sections: A.10, B.1, B.2, C.1.23, and C.1.24.
Complies
Explain
x
Article 29.3 of the By-Laws provides that “no shareholder may cast a number of votes greater than those
corresponding to shares representing ten (10%) per cent of share capital, even if the number of shares
held exceeds such percentage of the share capital. This limitation does not affect votes corresponding to
shares with respect to which a shareholder is holding a proxy as a result of the provisions of article 23
above, provided, however, that with respect to the number of votes corresponding to the shares of each
shareholder represented by proxy, the limitation set forth above shall apply”.
Section 4 of such article adds: “The limitation set forth in the preceding section shall also apply to the
maximum number of votes that may be collectively or individually cast by two or more shareholders that
are entities or companies belonging to the same group. Such limitation shall also apply to the number of
votes that may be cast collectively or individually by an individual and the shareholder entity, entities, or
companies controlled by such individual. A group shall be deemed to exist under the circumstances
provided by law, and also when a person controls one or more entities or companies”.
Iberdrola believes that the limitation on the maximum number of votes that may be cast by a single
shareholder, or by several shareholders belonging to the same group or, if applicable, acting in concert, is
a measure to protect the many minority shareholders, whose investment is thus guarded from any
transaction that is contrary to the corporate interest of Iberdrola. In this regard, it should be noted that
approximately one-fourth of Iberdrola’s capital is held by retail investors, who thus have little room to
manoeuvre and respond to a possible influence-seeking shareholder that owns a non-controlling interest
but does not reach the threshold requiring a takeover bid, and whose interest is not totally in line with the
corporate interest.
It should also be noted that such voting limitation has been in effect since 16 June 1990, the date on
which the General Shareholders’ Meeting was held at which it was resolved, by unanimous vote of the
attendees, to bring the By-Laws of the Company (then doing business as Iberduero, S.A.) into line with
the restated text of the Companies Act approved by Royal Legislative Decree 1564/1989 of 22 December.
This shows the level of corporate consensus that has existed on such voting limitation from the very
beginning, which has been confirmed by the fact that such limitation has remained unchanged through
various by-law amendments passed by the shareholders at General Shareholders’ Meetings. In turn, it
reflects the will of the shareholders to increase their bargaining power in the event of hostile offers or
transactions.
In any event, article 56 of the current By-Laws establishes the instances of removal of such voting
limitation in the event that the Company is the target of a takeover bid that receives the required
shareholder approval, in which case the provisions of section 527 of the Companies Act prevail. Pursuant
thereto, the limitation on the maximum number of votes that may be cast by a shareholder does not
constitute an obstacle to a takeover bid.
70
2. When both the parent company and a company controlled by it are listed companies,
they both provide detailed public disclosure on:
a) Their respective areas of activity, and any business dealings between them, as
well as between the controlled listed company and other companies belonging to
the group;
b) The mechanisms in place to resolve any conflicts of interest that may arise.
See sections: D.4 and D.7
Complies
Complies in part
Explain
Not applicable
x
3. Even if not expressly required under applicable commercial laws, transactions
involving a structural change of the company and, in particular, the following, are
submitted to the shareholders at the general shareholders’ meeting for approval:
a) The transformation of listed companies into holding companies through
“subsidiarisation”, i.e. reallocating to controlled entities core activities that were
previously carried out by the company itself, even if the latter retains full
ownership of the former;
b) The acquisition or disposal of key operating assets, when it involves an actual
change in the object of the company;
c) Transactions whose effect is tantamount to the liquidation of the company.
See section: B.6
Complies
x
Complies in part
Explain
4. Detailed proposals of the resolutions to be adopted at the general shareholders’
meeting, including the information to which recommendation 27 refers, are made
public at the time of publication of the announcement of the call to the general
shareholders’ meeting.
Complies
x
Explain
5. Matters that are substantially independent are voted on separately at the general
shareholders’ meeting, in order to allow the shareholders to express their voting
preferences separately. This rule applies, in particular:
a) To the appointment or ratification of directors, which shall be voted on
individually;
b) In the event of amendments of the By-Laws, to each article or group of articles
that are substantially independent of one another.
Complies
x
Complies in part
Explain
71
6. Companies allow split votes so financial intermediaries who are recorded as having
shareholder status but act for the account of different clients can divide their votes in
accordance with the instructions given by such clients.
Complies
x
Explain
7. The board performs its duties with a unity of purpose and independent judgement,
affording equal treatment to all shareholders in furtherance of the corporate interest,
which shall be understood to mean the optimisation, in a sustained fashion, of the
financial value of the company.
It likewise ensures that in its dealings with stakeholders, the company abides by the
laws and regulations, fulfils its obligations and contracts in good faith, respects the
customs and good practices of the industries and territories in which it carries on its
business, and upholds any other social responsibility standards to which it has
voluntarily adhered.
Complies
x
Complies in part
Explain
8. The board assumes responsibility, as its core mission, for approving the company’s
strategy and the organisation required to put it into practice, and to ensure that
Management meets the objectives set while pursuing the company’s interest and the
object of the company. As such, the full Board reserves for itself the right to approve:
a) The company’s policies and general lines of strategy, and in particular:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
Strategic or business plan, as well as management objectives and annual
budgets;
Investment and financing policy;
Definition of the structure of the group of companies;
Corporate governance policy;
Corporate social responsibility policy;
Policy regarding remuneration and evaluation of performance of senior
management;
Risk control and management policy, as well as the periodic monitoring of the
internal information and control systems.
Dividend policy, as well the treasury share policy and, especially, the limits
thereto.
See sections: C.1.14, C.1.16, and E.2
b) The following decisions:
i.
ii.
iii.
At the proposal of the company’s chief executive, the appointment and, if
applicable, the removal of senior officers, as well as their severance
provisions.
The remuneration of directors and, in the case of executive directors, the
additional remuneration for their executive duties and other terms and
conditions that must be included in their contracts.
The financial information that the company must periodically make public due
to its status as listed company.
72
iv.
v.
Investments or transactions of all kinds which are strategic in nature due to
the large amount or special characteristics thereof, unless approval thereof
falls upon the shareholders at the general shareholders’ meeting.
The creation or acquisition of interests in special-purpose entities or entities
registered in countries or territories regarded as tax havens, as well as any
other transactions or operations of a similar nature whose complexity might
impair the transparency of the group.
c) Transactions made by the company with directors, with significant shareholders
or shareholders with Board representation, or with other persons related thereto
(“related-party transactions”).
However, board authorisation need not be required in connection with relatedparty transactions that simultaneously meet the following three conditions:
1. They are governed by standard-form agreements applied on an across-theboard basis to a large number of clients;
2. They are conducted at prices or rates generally set by the party acting as
supplier of the goods or services in question;
3. The amount thereof is no more than 1% of the company’s annual revenues.
It is recommended that related-party transactions only be approved by the board
upon a prior favourable report from the audit committee or such other committee
handling the same function; and that the directors affected thereby should
neither exercise nor delegate their votes, and should withdraw from the meeting
room while the board deliberates and votes on the transaction.
It is recommended that the powers granted herein to the board are conferred
without the power of delegation, except for those mentioned under b) and c)
above, which may, for urgent reasons, be adopted by the executive committee
subject to subsequent ratification by the full board.
See sections: D.1 and D.6
Complies
x
Complies in part
Explain
9. In order to operate effectively and in a participatory manner, the board ideally is
comprised of no fewer than five and no more than fifteen members.
See section: C.1.2
Complies
x
Explain
10. External directors, proprietary and independent, occupy an ample majority of the
board and the number of executive directors is the minimum necessary number,
bearing in mind the complexity of the corporate group and the percentage interest
held by the executive directors in the company’s share capital.
See sections: A.3 and C.1.3.
Complies
x
Complies in part
Explain
73
11. Among external directors, the relation between the number of proprietary directors
and independent directors reflects the proportion existing between the share capital
of the company represented by proprietary directors and the rest of its capital.
This strict proportionality standard can be relaxed so that the weight of proprietary
directors is greater than would correspond to the total percentage of the share
capital that they represent:
1. In large cap companies where few or no equity stakes attain the legal threshold
regarded as significant, but there are shareholders holding interests with a high
absolute value.
2. In companies with a plurality of unrelated shareholders represented on the board.
See sections: A.2, A.3, and C.1.3
Complies
x
Explain
12. The number of independent directors represents at least one-third of the total
number of directors.
See section: C.1.3
Complies
x
Explain
13. The status of each director is explained by the board at the general shareholders’
meeting at which the shareholders are to make or ratify their appointment and such
status is confirmed or reviewed, as the case may be, annually in the Annual
Corporate Governance Report, after verification by the appointments committee. Said
report also discloses the reasons for the appointment of proprietary directors at the
proposal of shareholders controlling less than 5% of the share capital, as well as the
reasons for not having accommodated formal petitions, if any, for presence on the
board from shareholders whose equity stake is equal to or greater than that of others
at whose proposal proprietary directors have been appointed.
See sections: C.1.3 and C.1.8
Complies
x
Complies in part
Explain
14. When the number of female directors is scant or nil, the appointments committee
takes steps to ensure that when new vacancies are filled:
a) Selection procedures do not have an implied bias that hinders the selection of
female directors;
b) The company deliberately looks for women with the target professional profile
and includes them among the potential candidates.
See sections: C.1.2, C.1.4, C.1.5, C.1.6, C.2.2, and C.2.4.
74
Complies
x
Complies in part
Explain
Not applicable
15. The chair, as the person responsible for the effective operation of the board, ensures
that directors receive adequate information in advance of board meetings; promotes
debate and the active involvement of directors during board meetings; safeguards
their rights to freely take a position and express their opinion; and, working with the
chairs of the appropriate committees, organises and coordinates regular evaluations
of the Board and, where appropriate, of the chief executive officer.
See sections: C.1.19 and C.1 41
Complies
x
Complies in part
Explain
16. When the chair of the board is also the chief executive of the company, one of the
independent directors is authorised to request the call to a board meeting or the
inclusion of new business on the agenda; to coordinate and hear the concerns of
external directors; and to lead the board’s evaluation of the chair.
See section: C.1.22
Complies
x
Complies in part
Explain
Not applicable
17. The secretary of the board takes particular care to ensure that the board’s actions:
a) Adhere to the letter and the spirit of laws and their implementing regulations,
including those approved by the regulatory authorities;
b) Comply with the company’s By-Laws and the Regulations for the general
shareholders’ meeting, the Regulations of the board and other regulations of the
company;
c) Are informed by those good governance recommendations included in this
Unified Code as the company has subscribed to.
And, in order to safeguard the independence, impartiality, and professionalism of the
secretary, the appointment and removal thereof are reported upon by the
appointments committee and approved by the full board; and that such appointment
and removal procedures are set forth in the regulations of the board.
See section: C.1.34
Complies
x
Complies in part
Explain
18. The board meets with the frequency required to perform its duties efficiently, in
accordance with the schedule and agendas set at the beginning of the financial year,
and each director is entitled to propose items of the agenda that were not originally
included therein.
See section: C.1.29
Complies
x
Complies in part
Explain
75
19. Directors’ absences are limited to unavoidable cases and quantified in the Annual
Corporate Governance Report. And when there is no choice but to grant a proxy, it is
granted with instructions.
See sections: C.1.28, C.1.29 and C.1.30
Complies
x
Complies in part
Explain
20. When directors or the secretary express concerns about a proposal or, in the case of
the directors, regarding the running of the company, and such concerns have not
been resolved at a board meeting, such concerns are recorded in the minutes at the
request of the person expressing them.
Complies
x
Complies in part
Explain
Not applicable
21. The full board evaluates the following on a yearly basis:
a) The quality and efficiency of the board’s operation;
b) On the basis of a report submitted to it by the appointments committee, how well
the chair of the board and the chief executive of the company have carried out
their duties;
c) The performance of its committees, on the basis of the reports furnished by them.
Complies
x
Complies in part
Explain
22. All directors are able to exercise the right to request any additional information they
require on matters within the board’s purview. Unless the by-laws or the regulations
of the board provide otherwise, such requests are addressed to the chair or the
secretary of the board.
See section: C.1.41
Complies
x
Explain
23. All directors are entitled to call on the company for the advice they need to carry out
their duties. The company provides suitable channels for the exercise of this right,
which, in special circumstances, may include external advice at the company’s
expense.
See section: C.1.40
Complies
x
Explain
76
24. Companies organise induction programmes for new directors to rapidly and
adequately acquaint them with the company and its corporate governance rules.
Directors are also offered refresher training programmes when circumstances so
advise.
Complies
x
Complies in part
Explain
25. Companies require that directors devote sufficient time and effort to perform their
duties efficiently, and, as such:
a) Directors apprise the appointments committee of their other professional duties,
in case they might detract from the necessary dedication;
b) Companies lay down rules about the number of boards on which their directors
may sit.
See sections: C.1.12, C.1.13, and C.1.17
Complies
x
Complies in part
Explain
26. The proposal for the appointment or re-election of directors that the board submits to
the shareholders at the general shareholders’ meeting, as well as the interim
appointment of directors to fill vacancies, are approved by the board:
a) At the proposal of the appointments committee, in the case of independent
directors.
b) Subject to a prior report from the appointments committee, in the case of other
directors.
See section: C.1.3
Complies
x
Complies in part
Explain
27. Companies post the following director information on their websites, and keep such
information updated:
a) Professional profile and biographical data;
b) Other boards of directors of listed or unlisted companies on which they sit;
c) Statement of the director’s classification, specifying, for proprietary directors, the
shareholder they represent or to whom they are related.
d) Date of their first and subsequent appointments as a company director; and
e) Shares held in the company and options thereon held by them.
Complies
x
Complies in part
Explain
28. Proprietary directors tender their resignation when the shareholder they represent
sells its entire shareholding interest. The appropriate number of them do likewise
when such shareholder reduces its interest to a level that requires a reduction in the
number of its proprietary directors.
77
See sections: A.2, A.3, and C.1.2
Complies
x
Complies in part
Explain
29. The board of directors does not propose the removal of any independent director
prior to the expiration of the term set by the by-laws for which such director was
appointed, except where good cause is found by the board upon a prior report from
the appointments committee. In particular, good cause shall be deemed to exist
whenever the director has failed to perform the duties inherent in the position held
thereby or comes under any of the circumstances causing the director to no longer
be independent pursuant to the provisions of Order ECC/461/2013.
The removal of independent directors may also be proposed as a result of takeover
bids, mergers, or other similar corporate transactions that entail a change in the
equity structure of the company, when such changes in the structure of the board
follow from the proportionality standard mentioned in Recommendation 11.
See sections: C.1.2, C.1.9, C.1.19, and C.1.27
Complies
x
Explain
30. Companies establish rules obliging directors to report and, if appropriate, to resign
in those instances as a result of which the credit and reputation of the company
might be damaged and, in particular, they require that such directors report to the
board any criminal charges brought against them, and the progress of any
subsequent proceedings.
If a director is indicted or tried for any of the crimes described in section 213 of the
Companies Act, the board examines the matter as soon as practicable and, in view of
the particular circumstances thereof, decides whether or not it is appropriate for the
director to continue to hold office. And the board provides a substantiated account
thereof in the Annual Corporate Governance Report.
See sections: C.1.42, C.1.43
Complies
x
Complies in part
Explain
31. All directors clearly express their opposition when they feel that any proposed
resolution submitted to the board might be contrary to the best interests of the
company. And in particular, independent directors and the other directors not
affected by the potential conflict of interest do likewise in the case of decisions that
could be detrimental to the shareholders lacking board representation.
When the board adopts material or reiterated resolutions about which a director has
expressed serious reservations, such director draws the pertinent conclusions and,
if such director chooses to resign, sets out the reasons in the letter referred to in the
next recommendation.
This Recommendation also applies to the secretary of the board, even if the
secretary is not a director.
78
Complies
x
Complies in part
Explain
Not applicable
32. Directors who give up their place before their tenure expires, through resignation or
otherwise, explain the reasons in a letter sent to all members of the board. Without
prejudice to such withdrawal being communicated as a significant event, the reason
for the withdrawal is explained in the Annual Corporate Governance Report.
See section: C.1.9
Complies
x
Complies in part
Explain
Not applicable
33. Remuneration paid by means of delivery of shares in the company or companies that
are members of the group, share options or instruments indexed to the price of the
shares, and variable remuneration linked to the company’s performance or pension
schemes is confined to executive directors.
This recommendation shall not apply to the delivery of shares when such delivery is
subjected to the condition that the directors hold the shares until they cease to hold
office as directors.
Complies
x
Complies in part
Explain
Not applicable
34. The remuneration of external directors is such as is necessary to compensate them
for the dedication, qualifications, and responsibility required by their position, but is
not so high as to compromise their independence.
Complies
x
Explain
Not applicable
35. The remuneration linked to company earnings takes into account any qualifications
included in the external audit report that reduce such earnings.
Complies
x
Explain
Not applicable
36. In the case of variable remuneration, remuneration policies include technical limits
and safeguards required to ensure that such remuneration reflects the professional
performance of the beneficiaries thereof and not simply the general performance of
the markets or of the industry in which the company does business or other similar
circumstances.
Complies
x
Explain
Not applicable
37. When there is an executive committee (hereinafter, “executive committee”), the
breakdown of its members by director category is similar to that of the board, and its
secretary is the secretary of the board.
79
Complies
Complies in part
x
Explain
Not applicable
The Executive Committee of Iberdrola is made up of five directors, and the secretary of the Board of
Directors serves as secretary of such Executive Committee. As regards its composition, the Board of
Directors of the Company has an executive director, an external director, and a proprietary director. Their
membership in the Executive Committee causes their relative weight at such Committee to be necessarily
greater than that on the Board of Directors. However, Iberdrola believes that it is essential for them to be
a part of the Executive Committee. In any event, the Executive Committee has two independent directors,
one of them being the coordinating director (consejera coordinadora), which provides adequate
equilibrium in the composition thereof, with representation of the various classes of directors of the
Company, and ensures that their duties may not be performed along lines different from those reflected
by the composition of the Board of Directors.
38. The board is always kept informed of the matters dealt with and the resolutions
adopted by the executive committee, and all members of the Board receive a copy of
the minutes of the meetings of the executive committee.
Complies
x
Explain
Not applicable
39. In addition to the audit committee mandatory under the Securities Market Act, the
board of directors forms a single appointments and remuneration committee as a
separate committee of the board, or an appointments committee and a remuneration
committee.
The rules governing the make-up and operation of the audit committee and the
appointments and remuneration committee or committees are set forth in the
regulations of the board, and include the following:
a) The board appoints the members of such committees, taking into account the
background knowledge, qualifications, and experience of the directors and the
responsibilities of each committee, discusses its proposals and reports, and
receives a report, at the first meeting of the full board following the meetings of
such committees, on their activities and the work done.
b) These committees are formed exclusively of external directors and have a
minimum of three members. The foregoing is without prejudice to the attendance
of executive directors or senior officers, when expressly resolved by the
members of the committee.
c) Committee chairs are independent directors.
d) They may receive external advice, whenever they feel this is necessary for the
discharge of their duties.
e) Minutes are prepared of their meetings, and a copy is sent to all board members.
Complies
x
Complies in part
Explain
40. Supervising compliance with internal codes of conduct and corporate governance
rules is entrusted to the audit committee, the appointments committee or, if they
exist separately, to the compliance or corporate governance committee.
80
Complies
x
Explain
41. The members of the audit committee and, particularly, the chair thereof, are
appointed taking into account their background knowledge and experience in
accounting, auditing, and risk management matters.
Complies
x
Explain
42. Listed companies have an internal audit function which, under the supervision of the
audit committee, ensures the smooth operation of the information and internal
control systems.
See section: C.2.3
Complies
x
Explain
43. The head of internal audit presents an annual work plan to the audit committee;
reports to it directly on any issues arising in the execution of such plan; and submits
an activities report to it at the end of each financial year.
Complies
x
Complies in part
Explain
44. The risk control and management policy specifies at least:
a) The different types of risk (operational, technological, financial, legal,
reputational, etc.) the company is exposed to, including contingent liabilities and
other off-balance sheet risks among financial or economic risks;
b) The determination of the risk level the company sees as acceptable;
c) The measures planned in order to mitigate the impact of identified risks in the
event that they materialise;
d) The internal reporting and control systems to be used to monitor and manage the
above risks, including contingent liabilities and off-balance sheet risks.
See section: E
Complies
x
Complies in part
Explain
45. The audit committee’s role is to:
1. With respect to the internal control and reporting systems:
a) Properly manage and disclose the main risks, if any, identified as a result of
supervising the effectiveness of the internal control of the company and internal
auditing.
b) Ensure the independence and effectiveness of the internal audit area; make
proposals regarding the selection, appointment, re-election, and withdrawal of
the head of the internal audit area; propose the budget for such area; receive
periodic information regarding its activities; and verify that senior management
81
takes into account the conclusions and recommendations contained in its
reports.
c) Establish and supervise a mechanism whereby the employees may give notice,
on a confidential basis and, if deemed appropriate, anonymously, of any
potentially significant irregularities, especially of a financial and accounting
nature, that they notice at the company.
2. With respect to the external auditor:
a) Regularly receive from the external auditor information regarding the audit plan
and the results of the implementation thereof, and verify that senior management
takes its recommendations into account.
b) Ensure the independence of the external auditor, to which end:
i.
The company reports a change of auditor to the CNMV as a significant event,
accompanied by a statement of any disagreements with the outgoing auditor
and the reasons for the same.
ii.
In the event of resignation of the external auditor, the committee investigates
the circumstances that may have given rise thereto.
See sections: C.1.36, C.2.3, C.2.4, and E.2
Complies
x
Complies in part
Explain
46. The audit committee may cause any company employee or officer to appear before it,
and even order their appearance without the presence of any other officer.
Complies
x
Explain
47. The audit committee reports to the board, prior to the adoption thereby of the
corresponding decisions, on the following matters specified in Recommendation 8:
a) The financial information that the company must periodically make public due to
its status as listed company. The committee should ensure that interim accounts
are prepared under the same accounting standards as the annual accounts and,
to this end, consider whether a limited review by the external auditor is
appropriate.
b) The creation or acquisition of interests in special-purpose entities or entities
registered in countries or territories regarded as tax havens, as well as any other
transactions or operations of a similar nature whose complexity might impair the
transparency of the group.
c) Related-party transactions, unless such prior reporting duty has been assigned
to another supervision and control committee.
Complies
x
Complies in part
Explain
48. The board of directors seeks to present the accounts to the shareholders at the
general shareholders’ meeting without reservations or qualifications in the audit
report and, in the exceptional instances where they do exist, both the chair of the
82
audit committee and the auditors give a clear account to the shareholders of the
content and scope of such reservations or qualifications.
See section: C.1.38
Complies
x
Complies in part
Explain
49. The majority of the members of the appointments committee –or of the appointments
and remuneration committee, if one and the same– are independent directors.
See section: C.2.1
Complies
x
Complies in part
Explain
50. The appointments committee has the following duties, in addition to those stated in
the preceding recommendations:
a) To assess the qualifications, background knowledge, and experience necessary
to sit on the Board, defining, accordingly, the duties and qualifications required
of the candidates to fill each vacancy, and decide the time and dedication
necessary for them to properly perform their duties.
b) To examine or organise, in the manner it deems appropriate, the succession of
the chair and the chief executive and, if appropriate, make proposals to the board
for such succession to take place in an orderly and well-planned manner.
c) To report on senior officer appointments and removals that the chief executive
proposes to the board.
d) To report to the board on the gender diversity issues discussed in
Recommendation 14 of this Code.
See section: C.2.4
Complies
x
Complies in part
Explain
Not applicable
51. The appointments committee consults with the company’s president and the chief
executive, especially on matters relating to executive directors.
And that any board member may request that the appointments committee consider
possible candidates to fill vacancies for the position of director, if it finds them
suitably qualified.
Complies
x
Complies in part
Explain
Not applicable
52. The remuneration committee is responsible for the following duties, in addition to
those set forth in the preceding recommendations:
a) To propose to the board of directors:
i.
The remuneration policy for directors and senior officers;
ii.
The individual remuneration of executive directors and other terms of their
contracts.
83
iii.
The basic terms and conditions of the contracts with senior officers.
b) To ensure compliance with the remuneration policy set by the company.
See sections: C.2.4
Complies
x
Complies in part
Explain
Not applicable
53. The remuneration committee consults with the chair and the chief executive of the
company, especially on matters relating to executive directors and senior officers.
Complies
x
Explain
Not applicable
84
H. OTHER INFORMATION OF INTEREST
1. If there are any significant aspects regarding corporate governance at the company
or at entities of the group that is not included in the other sections of this report, but
should be included in order to provide more complete and well-reasoned information
regarding the corporate governance structure and practices at the entity or its group,
briefly describe them.
SECTION A.1
The shareholders acting at the General Shareholders’ Meeting of the Company held on 22 March
2013 approved two increases in share capital by means of scrip issues in order to implement, for the
fourth consecutive year, the shareholder compensation system called “Iberdrola Flexible Dividend”
(“Iberdrola Dividendo Flexible”), which allows the shareholders to decide whether they prefer to
receive all or part of their compensation in cash or in Iberdrola bonus shares.
The second increase in capital took place in January 2014, when the traditional interim dividend for
financial year 2013 would otherwise have been paid, and the number of new shares that were issued
and floated came to 133,492,000, par value 0.75 euro each, without a share premium, representing
approximately 2.14% of the share capital prior to the increase.
The shareholders acting at the General Shareholders’ Meeting held on 28 March 2014 approved a
reduction in share capital by means of the retirement of 91,305,304 treasury shares of Iberdrola
representing 1.43% of the share capital, and the acquisition of the Company’s own shares
representing a maximum of 0.66% of the share capital through a buy-back programme for the
retirement thereof.
As a result of such resolution, the share capital of Iberdrola was reduced by the amount of
100,100,250.00 euros on 5 May 2014 through the retirement of 133,467,000 treasury shares
(91,305,304 shares already in treasury and 42,161,696 shares acquired from the shareholders
through the buy-back programme), representing approximately 2.09% of the share capital prior to the
reduction. The share capital resulting from the reduction was set at 4,680,000,000.00 euros,
corresponding to 6,240,000,000 shares.
The purpose of the reduction in capital was to retire treasury shares, for which reason there was no
return of contributions as the Company itself was the holder of the retired shares.
In addition, the shareholders acting at the General Shareholders’ Meeting of the Company held on 28
March 2014 approved, under item six on the agenda, two increases in share capital by means of a
scrip issue in order to implement, for the fifth consecutive year, the shareholder compensation system
known as Iberdrola Flexible Dividend.
The first increase in capital took place in July 2014, when the traditional supplementary dividend for
financial year 2013 would otherwise have been paid, and the number of new shares that were issued
and floated came to 67,239,000, par value 0.75 euro each, without a share premium, representing
approximately 1.08% of the share capital prior to the increase.
The second increase in capital took place in December 2014, when the traditional dividend for
financial year 2014 would have been paid. The number of new shares issued and floated came to
81,244,000, par value 0.75 euro each, without a share premium, representing approximately 1.29% of
the share capital prior to the increase. The share capital of the Company came to 6,388,483,000
shares after this increase in capital.
SECTION A.2
Given that the shares are represented by book entries, no information is available on a daily basis
about the interest of shareholders in the share capital. However, since 7 May 2014, Iberdrola is a
member within Iberclear of the Communication Service for securities holdings and the balanced list of
buyers and sellers upon the terms set forth in Circular No 5/2013 of 27 November. The sources of the
information provided are the notices sent by the shareholders to the CNMV and to the Company itself,
and the information contained in their respective annual reports and press releases, as well as the
information that the Company obtains from Iberclear.
Pursuant to the provisions of section 23.1 of Royal Decree 1362/2007 of 19 October, further
developing Law 24/1988 of 28 July on the Securities Market, in connection with the transparency
requirements relating to the information on issuers whose securities have been admitted to trading on
85
an official secondary market or other regulated market in the European Union, it is deemed that
significant shareholders are the holders of at least 3% of voting rights.
According to available information, the approximate breakdown of the interests in the share capital by
type of shareholder is as follows:
-
Foreign investors
60%
-
Domestic entities
16%
-
Domestic retail investors
24%
SECTION A.3
Data at the date of approval of this Report.
SECTION A.8
As of the end of financial year 2014, the number of own shares and derivatives on treasury shares is
121,966,897, representing 1.909% of share capital.
Of such amount, Iberdrola has 60,985,277 own shares and 43,685,403 shares accumulated through
derivatives pending settlement and that are recorded as treasury shares in the consolidated financial
statements at 31 December 2014, 1,996,422 shares in the Scottish Power Group, and 15,299,795
shares corresponding to share swaps.
Pursuant to the authorisations granted to the Board of Directors by the shareholders at the General
Shareholders’ Meeting, during financial year 2014 Iberdrola acquired 176,365,850 own shares for
896,183 thousand euros and 43,685,403 shares, in the amount of 238,719 thousand euros, through
derivatives, although the latter are pending settlement as mentioned above. In addition, 7,783,210
own shares were sold for 41,529 thousand euros. Under such authorisations, Iberdrola has also
repurchased 133,467,000 own shares.
In addition, the Scottish Power Group acquired 503,448 shares in the amount of 2,688 thousand
euros during 2014, selling 877,590 shares for 3,455 thousand euros during the same period.
SECTION C.1.2
Composition of the Board of Directors at 31 December 2014.
SECTION C.1.3
The complete professional profiles of all the directors are available on the Company’s corporate
website (www.iberdrola.com).
Mr José Luis San Pedro Guerenabarrena was appointed director on 24 April 2012 with the status of
executive director, as he performed executive duties within the Company. Pursuant to article 10.2 of
the Regulations of the Board of Directors, those who have been employees or executive directors of
companies of the Group cannot be classified as independent directors unless three or five years,
respectively, have passed since the end of such relationship. Mr San Pedro Guerenabarrena held the
position of chief operating officer (consejero-director general) until 24 June 2014, the date on which he
ceased executive duties at his own request, but continues to serve as a member of the Board of
Directors and of the Executive Committee thereof. For that reason, Mr José Luis San Pedro
Guerenabarrena was reclassified as other external director on that date.
SECTION C.1.14
The general policies and strategies mentioned in this section have been approved by the Board of
Directors and can be viewed on the Company’s corporate website (www.iberdrola.com) together with
the other Corporate Policies of Iberdrola.
SECTION C.1.30
Below is the data on attendance of each and every one of the directors at the meetings of the Board
of Directors and its committees during financial year 2014:
86
Committees
Directors
Board
EC
ARSC
ARC
CSRC
7/7
15/15
----
----
----
MR JULIO DE MIGUEL AYNAT
7/7
----
10/10
----
----
MR SEBASTIÁN BATTANER ARIAS
7/7
----
10/10
----
----
MR XABIER DE IRALA ESTÉVEZ
7/7
15/15
----
----
----
MR IÑIGO VÍCTOR DE ORIOL IBARRA
7/7
----
----
14/14
----
7/7
15/15
----
14/14
----
7/7
----
----
----
6/10
MS SAMANTHA BARBER
7/7
----
----
----
10/10
MS MARÍA HELENA ANTOLÍN RAYBAUD
7/7
----
----
----
10/10
MR SANTIAGO MARTÍNEZ LAGE
7/7
----
----
14/14
----
GUERENABARRENA
7/7
15/15
----
----
MR ÁNGEL JESÚS ACEBES PANIAGUA
7/7
15/15
----
----
MR MANUEL LAGARES GÓMEZABASCAL
2/2
----
----
----
MS GEORGINA KESSEL MARTÍNEZ
7/7
----
10/10
----
MS DENISE MARY HOLT
4/4
----
-------
----
3/3
Notes:
-
The denominator indicates the number of meetings held during the period of the year in which the director served as
such or as a member of the respective Committee.
-
EC: Executive Committee.
-
ARSC: Audit and Risk Supervision Committee.
-
ARC: Appointments and Remuneration Committee.
-
CSRC: Corporate Social Responsibility Committee.
SECTION C.1.31
Iberdrola Group has been established a certification process in which the persons responsible for the
financial information from the different areas of the company certify: (i) that the financial information
the provide to Iberdrola for consolidation does not contain material errors or omissions and fairly
presents the results and the financial condition within their area of responsibility, and (ii) that they are
responsible for the establishment of the ICFRS within their area of responsibility and that they believe
the system is effective. The text of these certifications is inspired by the form of certification
established in section 302 of the U.S. Sarbanes-Oxley Act.
The culmination of the process is a joint certification that the chairman & chief executive officer and
the director of Administration and Control submit to the Board of Directors.
The process is carried out by means of electronic signature in a software application which manages
the areas of responsibility and time periods and which serves as a repository of all the documentation
generated, allowing for periodic review by the supervisory bodies of the Group.
87
SECTION C.1.33
The secretary of the Board of Directors is a part of the executive team as the person responsible for
the Office of the General Secretary and of the Office of the Secretary of the Board of Directors of the
Company.
SECTION D
All the information regarding related-party transactions included in this Annual Corporate Governance
Report 2014 is consistent with that contained in the Company’s annual financial report for financial
year 2014.
SECTION D.2
Contracts for financial instruments are made in competition with various entities, with the one most
beneficial for the Company at any time being selected. The Financing and Financial Risk Policy
establishes a number of limits on derivatives contracts with a single financial institution in order to
avoid excessive risk concentration, as well as to ensure a minimum creditworthiness level below
which no contracts could be made. Such limits are complied with in respect of all counterparties,
including the significant shareholders of the Company.
The amounts set forth as “profits and other dividends paid” correspond to the cash dividend
distributed by the Company in July 2014 and to the free-of-charge allocation rights stemming from the
two increases in share capital by means of a scrip issue approved by the shareholders at the General
Shareholders' Meetings held on 22 June 2013 and 22 March 2014, which were sold to the Company
at a guaranteed fixed price pursuant to the terms and conditions of such increases.
This information includes transactions with the shareholders ACS and Kutxabank, holders of
significant interests at the close of financial year 2014.
All of these transactions were made in the ordinary course of business, were carried out on an arm’slength basis, and the information about them is not needed to give a true and fair view of the assets,
the financial condition, and the results of operations of the Company.
The Iberdrola Group optimises its banking transactions management by selecting financial institutions
based on their solvency, presence in the Group’s markets, and capacity to provide the best service in
terms of costs and quality. The selection of suitable financial institutions for each bank product is
supplemented by a balanced allocation based on the financial institution’s risk exposure toward the
Iberdrola Group and the volume of business granted.
Kutxabank provides banking services to the Group in the management of the domestic and
international business.
Kutxabank corresponds in terms of how it ranks in profits and risk exposure towards the Iberdrola
Group, which shows Iberdrola’s commitment to achieving a balanced risk/business distribution.
Kutxabank ranks below 30th as to both risk exposure and profits; therefore, it does not have a
significant position as a provider of financial services to the Iberdrola Group.
SECTION D.3
The company SOIL TRATAMIENTO DE AGUAS INDUSTRIALES, S.L. was awarded a contract for
the supply, transport, assembly, and start-up of the COGENERACIÓN RAMOS water treatment plant
in Mexico.
The contract award occurred within the framework of an international tender in which 15 companies
were selected, with its offer being the most advantageous. Mr Íñigo Víctor de Oriol Ibarra indirectly
controls 23.4% of SOIL TRATAMIENTO DE AGUAS INDUSTRIALES, S.L. Family members close to
Mr Íñigo Víctor de Oriol Ibarra indirectly control 39.4%.
Mr Íñigo Víctor de Oriol Ibarra has not directly or indirectly participated in any of the stages of the
tender. The award was made in compliance with the provisions of the procedure for conflicts of
interests and related-party transactions with directors, significant shareholders, and senior officers.
SECTION D.4
Transactions with subsidiaries and companies in which the Company has an interest that have not
been eliminated in the process of consolidation were made in the ordinary course of business of the
88
Company, were carried out under arm’s-length conditions, and are of little significance to accurately
reflect the assets, financial condition, and results of operations of the Company.
2. In this section, you may also include any other information, clarification, or comment
relating to the prior sections of this report to the extent they are relevant and not
repetitive.
Specifically, state whether the company is subject to laws other than Spanish laws
regarding corporate governance and, if applicable, include such information as the
company is required to provide that is different from the information required in this
report.
3. The company may also state whether it has voluntarily adhered to other international,
industrial, or other codes of ethical principles or good practices. If so, identify the
code in question and the date of adherence thereto.
Pursuant to the provisions of section 2 of the annex of adherence to the Good Tax Practices Code
and of sub-section 1.d) of the Good Tax Practices Policy, the Company reports that it has complied
with the provisions of such Code as from the time of approval thereof. Specifically, it is reported that,
during financial year 2014, the Company’s head of tax matters appeared on 17 February and 21 July
before Iberdrola’s Audit and Risk Supervision Committee, all of which was reported to the Board of
Directors. In addition, on 21 October the head of tax matters appeared before the Board of Directors
at an informational meeting regarding compliance with the Good Tax Practices Policy and fiscal
standards applied during financial year 2014.
89
This annual corporate governance report was approved by the Board of Directors of the
company at its meeting of 17 February 2015.
State whether any directors voted against or abstained in connection with the approval
of this Report.
Yes
No
x
the director that did not vote in
favour of the approval of this
report
Reasons (opposed,
abstained, absent)
Explain the reasons
90

Annual Corporate Governance Report

Transcription

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